lecture 5

DOUBLE ENTRY SYSTEM

FOUNDED IN 1494 BY LUCAS PACIOLI

CLASSIFICATION OF ACCOUNTS UNDER DOUBLE ENTRY SYSTEM

  • PERSONAL ACCOUNT 
THE ACCOUNTS ARE OPENED UNDER THE NAME OF INDIVIDUAL FIRM,COMPANY,INDIVIDUAL ETC. EX : OUR CREDITOR MR.X , MR X IS CONSIDERED AS A PERSONAL ACCOUNT.
(WHENEVER A TRANSACTION HAS TRANSACTIONS RELATED TO DEBT OR CREDIT THEN THE PERSON/ORGANISATION WHO HAS GIVEN US OR LENT MONEY THEN THAT PERSON/ORGANISATION IS TREATED AS PERSONAL ACCOUNT)

RULE: DEBIT THE RECEIVER
CREDIT THE GIVER 
  • REAL ACCOUNT
REAL ACCOUNTS ARE ALL THE ASSETS EXCEPT DEBTORS WHICH CAN BE CONVERTED TO CASH 
RULE: DEBIT WHAT COMES IN 
CREDIT WHAT GOES OUT 

  • NOMINAL ACCOUNT
NOMINAL ACCOUNT ARE THOSE ACCOUNT WHICH ARE RELATED TO EXPENSE,LOSSES AND INCOME,PROFIT.
RULE: DEBIT ALL EXPENSE AND LOSSES
CREDIT ALL INCOMES AND GAINS 


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