What is an Account
Each account is shown on a different page.
Page is divided vertically into two halves.
Left side is Debit side; right side is Credit side
Rules of Debit and Credit
There are two systems or practices of putting the accounts.
American System
This system classifies accounts into five categories:
Assets account
Debit the increase in assets; Credit the decrease in assets
Liabilities account
Debit the decrease in liabilities; Credit the increase in liabilities
Capital account
Debit the decrease in Capital; Credit the increase in Capital
Revenue account
Debit the decrease in income; Credit the increase in income
English system
Classification of Accounts
Personal Accounts
Personal accounts are those which are opened under the NAME of individuals, firms, company, institution etc.
For example John’s account, dinesh’s account, Coca-Cola ltd account, bank account etc.
Rule
Debit the Receiver
Credit the Giver
Real Accounts
All the assets owned by the business can be classified in this account. These can be categorized as
Tangible real accounts
All those which can be seen, touched and measured such as
Building
Land
Cash account
Stock account
Furniture account
Intangible real accounts
Those accounts which cannot be touched or seen. Examples include
Goodwill account
Patent accounts
Rule
Debit what comes in
Credit what goes out
Nominal Accounts
These include all those accounts which are related with incomes/gains and expenses/losses of the business.
| Incomes/gains | Expenses/losses |
| Commission received account | Rent paid account |
| Discount received account | Salary paid account |
| Interest received account | Commission paid account |
| Dividends received account | Discount allowed account |
| Loss due to theft account | |
| Loss due to fire account |
Rule
Debit all expense and losses
Credit all incomes and gains