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)
