Financial accounting notes

ACCOUNT:-
A summarized record of a business transaction is called an account.
Account is concerned with some goods, services, property, person (individual) or revenue
and expense.

CLASSES OF ACCOUNTS:

Accounts are classified into three categories under English (British) approach, i.e.
real, personal, and nominal. Whereas are divided into five classes under American
approach.

The kinds of Accounts under American Approach are:

1. Assets Accounts
2. Liabilities Accounts
3. Owner Equity Accounts (Capital/Proprietorship)
4. Revenue Accounts
(Income Statement Accounts)
5. Expenses Accounts
(Losses Accounts)

RULES OF DEBIT AND CREDIT:-

The rules of debit and credit in relation to the kinds of accounts are stated as under:
FOR ASSETS ACCOUNTS:
Increase in an asset account is recorded as debit.
Decrease in an asset account is recorded as credit.
FOR EXPENSE ACCOUNTS:
Increase in an expense account is recorded as debit.
Decrease in an expense account is recorded as credit.
FOR LIABILITIES ACCOUNTS:
Increase in liability account is recorded as credit.
Decrease in liability account is recorded as debit.
FOR CAPITAL ACCOUNTS (O.E.):
Increase in capital account is recorded as credit.
Decrease in capital account is recorded as debit.
FOR REVENUE ACCOUNTS:
Increase in revenue account is recorded as credit.
Decrease in revenue account is recorded as debit.
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