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C|ass|f|cat|on of Accounts

On th basis oI businss tvansation v!ating to

pvsons, pvopvtis and assts, inom and
xpnss th aounts av !assiIid as:
Ra! A]
Nomina! A]
Pvsona! A]
Va!uation A]
Pvsona! A]- Ths av aounts oI individua!s,
Iivms, ompanis, bankvs, assoiations with whom
businssman da!s
Ra! A]- Ths av th aounts oI pvopvtis,
assts ov possssions oI th businssman
Nomina! A]- Ths av aounts oI xpnss ov
!osss & gains ov inoms
Va!uation A]- Ths av aounts whih av
onvnd with va!uation oI assts viz. pvovision Iov
dpviation, pvovision Iov doubtIu! dbts t.
C!assiIiation oI Aounts -
Pvsona! A]
1vpes of personal A/c
ersonal A/c
u|e of ersona| Account
Fov x: iI ash is paid to Ram,
Ram a] ..............Dv
To, Cash a]
C!assiIiation oI Aounts -
Ra! A]
1vpes of 8eal A/c
lnLanalble 8eal
u|e of ea| Account
Fov x: II bui!ding is puvhasd Iov ash,
Bui!ding a] .......... Dv
Cash a]
C!assiIiation oI Aounts -
Nomina! A]
1vpes of nomlnal A/c
and Losses
lncomes and
Calns A/c
u|e of Nom|na| Account
Fov x: Rnt paid bv ash,
Rnt a]...............Dv
To, ash a]
o|den ru|es of Account|ng
Ra! A] : Dv what oms in & Cv what gos out
Pvsona! A] : Dv th vivv & Cv th givv
Nomina! A] : Dv a!! xpnss & !osss & Cv a!!
Inoms & Gains
Va!uation A] : Dv th A] whn it is to b
vdud & Cv th A] whn it is to b invasd
oth rea| a/c as we|| as Nom|na| a/c are |mpersona|
a/cs nowever when some pref|x or suff|x |s added to a
Nom|na| a/c |t becomes a ersona| a/c
Nomina! Aount Pvsona! aount
Reni accouni Reni piepaid a]c, Ouisianding ieni a]c,
Inieiesi accouni Piepaid inieiesi a]c, Ouisianding inieiesi a]c, Inieiesi
ieceived in advance a]c
Salaiy accouni Piepaid salaiies a]c, Ouisianding salaiies a]c
Insuiance accouni Piepaid Insuiance a]c, Ouisianding Insuiance a]c
Commission accouni Piepaid Commission a]c, Ouisianding Commission a]c
Aounting Equation :
Assts = Liabi!itis + Ownvs Equitv
Th vu!s oI Dv & Cv :
i) Dv invas in assts, Cv dvas in assts
ii) Dv dvas in !iabi!itis, Cv invas in
iii) Dv dvas in Ownvs quitv, Cv invas in
Ownvs quitv
Tvansation Aounts invo!vd Natuv oI a] Dbit] Cvdit
Reni paid
Reni a]c Nominal a]c Debii
Casl a]c Real a]c Ciedii
Salaiies paid
Salaiies a]c Nominal a]c Debii
Casl a]c Real a]c Ciedii
Inieiesi ieceived
Casl a]c Real a]c Debii
Inieiesi a]c Nominal a]c Ciedii
Fuiniiuie puiclased
Fuiniiuie a]c Real a]c Debii
Casl a]c Real a]c Ciedii
Maclineiy sold
Casl a]c Real a]c Debii
Maclineiy a]c Real a]c Ciedii
Salaiies ouisianding
Salaiies a]c Nominal a]c Debii
O]S Salaiies a]c Peisonal a]c Ciedii
Teleplone claiges
Teleplone claiges a]c Nominal a]c Debii
Casl a]c Real a]c Ciedii
Paid io Suiesl
Suiesl a]c Peisonal a]c Debii
Casl a]c Real a]c Ciedii
Received fiom
Molan (ownei)
Casl a]c Real a]c Debii
Capiial a]c Peisonal a]c Ciedii
JournaIising Transaction:
A jouvna! is a book oI pvimavv ntvv. Fivst a!! th
tvansations av vovdd in th jouvna! &
subsqunt!v thv av postd in !dgv.
Dat Pavtiu!avs L.F. Dbit
teps |n convert|ng 1ransact|ons |nto Iourna| Lntr|es
IdntiIv th tvansations Ivom th souv doumnts
suh as vipt, vouhv.
Dtvmin th natuv oI a tvansation i.. its IIt on

Dtvmin th two aspts oI th tvansation. Find

out th two aounts invo!vd
teps |n convert|ng 1ransact|ons |nto Iourna| Lntr|es
O Dtvmin th tvp oI ah aount.
O Dtvmin how th aounts av aIItd. S who
is th vivv ov givv ov whthv thv is an
xpns ov !oss & inom ov gain
O App!v th vu! oI jouvna!ising. Did whih
aount is dbitd and whih aount is vditd.
Compound Iourna| entr|es
O Some iiansaciions may be iecoided by means of a single iouinal
eniiies insiead of passing seveial iouinal eniiies. Sucl eniiy
(single) iegaiding iecoiding a numbei of iiansaciions is ieimed
as a 'Compound Iouinal eniiy'.
O Sucl eniiy may be iecoided in any of ile following ways:
O One paiiiculai a]c may be debiied wlile seveial oileis may be
O One paiiiculai a]c may be ciediied wlile seveial oileis may be
O Seveial a]cs may be debiied and seveial oilei a]cs may be ciediied.
Compound Iourna| entr|es
I!!ustvation: Pass a ompound jouvna! ntvv in th Io!!owing
O Pavmnt mad to Ram Rs. Iooo. H a!!owd a ash disount oI
Rs o
O Cash vivd Ivom Suvsh Rs. oo and a!!owd him a ash
disount oI Rs. o.
O A vunning businss was puvhasd bv Mohan with Io!!owing
assts and !iabi!itis:
Cash Rs. iooo, Land Rs ooo, Fuvnituv Rs Iooo, Stok Rs
iooo, Cvditovs Rs Iooo, Bank ovvdvaIt Rs iooo
pen|ng Lntry
O In case of iunning business, ile asseis and liabiliiies
appeaiing in ile pievious yeai's balance sleei aie biougli
foiwaid io ile cuiieni yeai wiil ile lelp of a iouinal eniiy
lnown as 'opening eniiy'.
O All asseis accounis aie debiied and all liabiliiies accounis
aie ciediied.
O Tle excess of asseis ovei liabiliiies is ile piopiieioi's
capiial and is ciediied io lis capiial accouni.
ass Lhe Cpenlna LnLrv on !anuarv 1 2008 on Lhe basls of Lhe
followlna lnformaLlon Laken from Lhe buslness of Mr Sunll
Casl in land :ooo Sundiy debiois ooo
Siocl of goods ooo Plani ooo
Land and building ioooo Sundiy ciediiois ioooo
Dat Pavtiu!avs L.F Rs. Rs.
Ian. i
Casl A]c Di.
Sundiy Debiois A]c Di.
Siocl A]c Di.
Plani A]c Di.
Land and Building A]c Di.
To, sundiy ciediiois
To, Capiial A]c
(Being balance biougli foiwaid
fiom ile lasi yeai)
O A !dgv is th pvinipa! book oI aounts.
O It is a gvoup oI aounts: it ontains an aount Iov
ah asst, !iabi!itv, vvnu & xpns A]
O It ontains a!! aounts oI th businss ntvpvis
whthv Ra!, Nomina! ov Pvsona!.
Dv. Aount Cv.
Pavtiu!avs jF Amt. Pavtiu!av jF Amt.
!osting process :
The term '!osting' means transferring the debit and credit
items from the JournaI to their respective accounts in the
WhiIe transferring the transaction from journaI to Iedger,
the transactions are cIassified. For each person, head of
expenditure, income, asset etc. separate accounts are
opened in the Iedger.
On debit side : Write the name of the credited a/c in the
journaI after the word "To".
On the credit side : Write the name of the debited a/c in the
journaI after the word "By".
!osting process :
AII the transactions reIating to a particuIar a/c shouId be
recorded in the a/c aIready opened. No new a/c of the same
name shouId be opened in the Iedger
The concerned a/c which has been debited (credited) in the
journaI shouId aIso be debited (credited) in the Ledger.
However, a reference shouId be made of the other a/c which has
been credited (debited) in the JournaI.
At the end of the accounting period, the a/cs are baIanced
If the debit side is heavier the difference wiII appear on the
credit side as, "By baIance c/d" in the particuIars coIumn. If the
credit side is heavier, the difference wiII appear on the debit side
as , "To baIance c/d"
Iourna||se the fo||ow|ng transact|ons and post them |nto the Ledger
am started bus|ness w|th a cap|ta| of s 10000
ne purchased furn|ture for cash s 4000
ne purchased goods from Mohan on cred|t s 2000
ne pa|d cash to Mohan s 1000
O So!: jouvna!
Dat Pavtiu!avs LF Dbit (Rs) Cvdit (Rs)
Casl A]c Di.
To, Capiial A]c
Fuiniiuie A]c Di.
To, Casl A]c
Puiclases A]c Di.
To, Molan
Molan A]c Di.
To, Casl A]c
urpose of ba|anc|ng |edger a/cs
The technique of finding out the net baIance of an account after
considering the totaIs of both debit and credit appearing in the
account is known as 'BaIancing the account'.
!ersonaI a/cs are baIanced to know whether a person is a
debtor or a creditor. A debit baIance indicates that the person is
our debtor & a credit baIance indicates that the person is our
creditor .
A debit baIance of a reaI a/c means an asset & a credit baIance
means IiabiIity
Debit baIance of a nominaI a/c means expense & a credit
baIance represents income
8elaLlonshlp beLween !ournal and a Ledaer
O Th tvansations av Iivst vovdd in th jouvna! and thn thv
av postd in th Ldgv. Thus, th jouvna! is th book oI ovigina!
ov pvimavv ntvv, whi! Ldgv is th book oI sond ov pvinipa!
O jouvna! vovds tvansation in a hvono!ogia! ovdv, whvas th
Ldgv vovds tvansation in an ana!vtia! ovdv.
O jouvna! is mov v!iab! as ompavd to th Ldgv sin it is th
in whih th ntvv is passd Iivst oI a!!.
O Th pvoss oI vovding tvansations is tvmd as 'jouvna!ising',
whi! th pvoss oI vovding tvansation in a Ldgv is known
as 'Posting'.