Rules and principles of double entry System Under traditional approach, there are four types of accounts called Personal Accounts. Real Accounts. Nominal Accounts. Valuation Accounts. Personal accounts - Accounts relating to persons are called personal accounts. These persons may be customers, suppliers, money lenders, owners and banks. Real Accounts - Accounts related to tangible and intangible properties and possession are known as real accounts are classified as Tangible Real Accounts and Intangible Real Accounts. Nominal Accounts - Accounts concerning the expenses, losses, incomes and gains of a business enterprise are called as nominal Accounts. These accounts helps in preparation of Income statement. Valuation Accounts - The process of attaching monetary value to some assets and liabilities is called as valuation. The accounts where such valuation is effected are called as valuation Accounts. Rules of debit and card under traditional approach Personal Account : Debit the receiver...

Double entry system Accounting historian have established that double entry book keeping was practised in Florence in the later 13th century. Although several Systems were developed by mathematicians and businessman to summarized and communicate business transaction, only the one which Luca Friar Pacioli complied has survived and has become the basis of modern Accounting. Luca Friar Pocioli is rightly recognized as the father of modern accounting. He authored the first printed book on double entry book keeping. It was titled as  "Summa de arithmetical geometrics proportionate proportionality". He described a method of arranging accounts in such a way that the double aspect  (present in every Account transaction) would be expressed by a debit amount and an equal and offsetting credit amount. Double entry system is the system under which each transaction is regarded to have two fold aspects and both the aspects are recorded to obtain Complete record of dealings. Double entry sy...

Classification of Accounting principles Accounting principles are also referred to as standards, assumption, postulates, concepts, convention, axioms, generally accepted accounting principles (GAAP) etc. The above term are interchangeably used though they have different connotations. We will discuss here only assumption, concepts and conventions because these terms have reasonable bearing on the accounting system. (A) Accounting assumptions  Certain fundamental Accounting assumptions underline the preparation and presentation of financial statement. Institute of Chartered Accountants of India and International Accounting Standards Committee vide AS-1 respectively have stated the following as Fundamental accounting assumption : (1) Going concern : Accounting records presume that the business will exist for a very long time unless the evidence available is contrary to this. Under this assumption, "the enterprise is normally viewed as a going concern, that is, as continuing in operat...

Liabilities It refers to an amount owing by a person, ( a debtor) to another (a creditors) payable in money, goods or services. In general liabilities are financial obligations to outside parties arising from events that have already happened. Eric L. Kohler -  "an amount owing by one person (a creditors), payable in money or in goods and services" Types of liabilities These are the following types of liabilities:- (a) Current liabilities : It refers to those liabilities which fall due for payment in a relatively short period (normally within one year). These are also known as s term liabilities. For example, creditors, bills payable, short term loans, outstanding Expenses etc. (b) Fixed liabilities  : It refers to long term liabilities which are payable after a long period of one year. These are also known as long term liabilities. For example, long term loans, public deposits, debentures etc. (c) Contingent liabilities : It refers to amount which may  or may not become ...

Assets An assets is any owned physical object (tangible) or right (intangible) , having a money value. In other words, assets are economic resources which are owned by a business and from which future Economic benefits are expected to flow to the enterprise. W.B. Meigs and R.F. Meigs  - "Assets are  Economic resources which are owned by a business and expected to benefit further operations" Cash Debtors, Investors, Stock of goods, plant and machineries, Land and building, computers, Vehicles, Goodwill etc are the examples of assets. Assets may have the value for the business for several reasons; for instance  : Cash  have a value because other things can be aquired with it. Debtors and investors are assets because business is entitled to get claim from debtors in future and investment may be realised in cash by selling them in the market. Building, plants and machinery, Goodwill etc, are also assets because these assets offer some potential benefits or rights or serv...

Branches of Accounting Accountancy is still in the process of evaluation. Accountancy has grown with the rapid growth of business. To meets the changing requirements of the business world, accountant have also discovered various specialized Branches of accounting. The important Branches of Accounting are stated below:- (1) Financial Accounting : It is concerned with the recording of transactions in financial books  in order to find out the trading results in term of profits or loss and financial position of the business, for a given period of time. The accounting which leads to the preparation of final accounts is called financial accounting. It is used by the proprietor, creditors, investors, employees, management, government, etc. Financial Accounting is historical in Nature. (2)  Cost accounting : It is concerned with Classification, recording, allocation and summarisation of current and budgeted costs. The object of cost Accounting is to find out the cost of goods produced...

Difference between book keeping and Accounting After studying the meaning of book keeping and Accounting the following point of difference emerge:- (1) Stage : Book keeping is the basis of Accounting. Accountings is the culmination of bookkeeping. It starts where book keeping ends. (2)  Scope :  Book keeping confined itself to recording posting, balancing and preparation of trial balance. Accounting is extends to preparation of final accounts after incorporating year end adjustment. (3)  Skill  :  Bookkeeping is done by junior staff because the nature of work is clerical. Accounting is done by senior staff, because nature of job requires imagination, skill and analytical ability. (4)  Operations :  Bookkeeping records transaction in significant and orderly manner.  Accounting classifies, summarises and provides information. (5)  Activities  : Bookkeeping covers journalising, posting and extracting of balance.  Accounting covers prep...