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)