Financial Accounting for Managers

The Accounting Mechanism of Debit & Credit

By Anil Kshatriya
24 June 2015 [IMT Nagpur]
Account

An account is a summarized record or

statement of transactions during a particular
period relating to a particular person or
institution, or to a particular property or asset;
or to a particular item of expenditure or
income.
Classification of Accounts
All Accounts are broadly classified under three
categories namely:
1. Personal Accounts
~ Relating to natural person like Mr. Patels A/c
~ Artificial persons like Bank A/c, RIL A/c
~ Representative Personal Account for group of
persons like Outstanding Salary A/c

2. Real Accounts - Relating to property or assets like

Land A/c, Building A/c, Machinery A/c etc.

3. Nominal Accounts Relating to expenses like Rent

A/c or incomes like Interest A/c
The Classification
ACCOUNTS

PERSONAL IMPERSONAL

REAL NOMINAL
 Quick Test!
Identify Account Type Real/Personal/Nominal
Salary A/c
Printing & Stationery A/c
ABC & Co. A/c
Outstanding Interest A/c
Goodwill A/c ( Fictitious Assets )
Discount Received A/c
Drawings A/c
Loss by Fire A/c
Prepaid Rent A/c
1. M/s RGV & Co. A/c
2. Patent No. 007 A/c
3. Profit on Sale of Machinery A/c
4. Ajays Capital A/c
5. Vijays Drawing A/c
6. Bank A/c
7. Bank Loan A/c
8. Inventory of Finished Goods A/c
9. Prepaid Rent A/c
10. Miscellaneous Receipts A/c
 Quick Test!
Identify the Accounts Involved
Company purchased goods on credit worth Rs.
50,000 from creditor.
It sold goods worth Rs 1,00,000 on cash.
Purchased Land for business form Mr. Sidhharth and
agreed to pay Rs. 1 crores next month via bank.
Sold his business vehicle to AB for cash worth
3,00,000.
Interest income on investment Rs. 50,000 received in
cash.