Advertisement
Financial Accounting
Financial Accounting
BOOK KEEPING–DOUBLE ENTRY SYSTEM
The Types of Accounts under Double Entry System of Book
Keeping are broadly classified into Personal and Impersonal Accounts.
I.
Personal Accounts - (eg. Debtors, Creditors etc.,)
Debit : The Receiver.
Credit : The Giver.
II.
Impersonal Accounts-This is further divided into Real and Nominal Accounts.
a) Real Accounts - (eg. Land, Building, Investments.)
Debit : What comes in.
Credit : What goes out.
b) Nominal Accounts:(eg.SalaryAccount,InterestAccount,
Commission, Rent etc.,)
Debit : All Expenses and Losses.
Credit : All Incomes and Gains.
I.
Journal, Ledger & Trial Balance :
Journal - This is a Preliminary Record of day to
day Business Transactions, which is to give effect to two different Accounts
involved in business transactions (i.e., Debit & Credit). The Journal Entry
shall have narration giving the description of the Transaction recorded.
Ledger - Ledger is a Permanent record of all
Transactions in a summarised and classified form. The Journal entries are
posted periodically under the Accounting head maintained in General Ledger
Register.
Trial Balance - This is a statement showing
the balance of all Ledger Accounts from the General Ledger Register. This is to
test the arithmetical accuracy of Books of Accounts.
II. Final Accounts :
Profit & Loss Account and Balance Sheet are the Final
Accounts derived from the Trial Balance. The Profit & Loss Account will end
with either Net Profit or Net Loss which is the Net result of the operating
activities of an Enterprise. The Balance Sheet is a statement prepared as on
the reporting date to show the Financial status (i.e., What the Company owns
and what it owes)