Introduction of Accounting

Accounting is a process of identifying, recording, summarizing, and reporting economic information to decision-makers in the form of financial statements. Financial statements will be useful to the following parties:

  • Suppliers
  • Customers
  • Employees
  • Banks
  • Suppliers of equipment’s, buildings and other assets
  • Owners


There are basically three types of Accounts maintained for transactions:

  • Personal Accounts
  • Real Accounts
  • Nominal Accounts

Personal Accounts

Personal Accounts are Accounts that relate to any persons, any company, any organization. Example: G.K. Enterprises, K.K Traders, UCO Bank,

Rules of Debit & Credit of Personal Account

Debit the receiver
Credit the giver

Real Accounts

Real Accounts are Accounts relating to properties and assets, which are owned by the business concern. Real accounts include tangible and intangible accounts. For example,

Land, Building, Purchases, Sale, Cash, Machine, Furniture etc.

Rules of Debit & Credit of Real Account

Debit what comes in
Credit what goes out

Nominal accounts

Nominal Accounts are Accounts that relate to incomes and expenses and gains and losses of a business concern. For example,

  • Salary Account
  • Commission Account
  • Rent Account
  • Interest Account

Rules of Debit & Credit of Nominal Account

 Debit all expenses and losses
 Credit all incomes and gains

Debit and Credit Examples

  1. April 1, A merchant started business with cash                    500000
DateParticularsL.F.Dr AmountCr Amount
1-April-16Cash A/c        
  To Capital A/c
 500000  500000
  • April 2, Deposited into UCO Bank                                              20000
DateParticularsL.F.Dr AmountCr Amount
2-April-16UCO Bank A/c       
   To Cash A/c
 20000  20000
  • April 3, Purchased goods on credit from Rahul Traders    10000
DateParticularsL.F.Dr AmountCr Amount
3-April-16Purchase A/c         
To Rahul Traders A/c
 10000  10000
  • April 3, Purchased goods from K.K Traders                            50000
DateParticularsL.F.Dr AmountCr Amount
3-April-16Purchase A/c         
To K.K Traders A/c
 50000  50000
  • April 4, Paid Cash to Rahul Traders                                           10000
DateParticularsL.F.Dr AmountCr Amount
4-April-16Rahul Traders A/c         
To Cash A/c
 10000  10000
  • April 4, Sold goods to G.K. Enterprises                                    40000
Date ParticularsL.F.Dr AmountCr Amount
4-April-16G.K. Enterprises A/c    
To Sale A/c
 40000  40000
  • April 5, Sold goods for cash                                                          5000
DateParticularsL.F.Dr AmountCr Amount
5-April-16Cash A/c         
To Sale A/c
 5000  5000
  • April 5, Paid Wages                                                                         750
DateParticularsL.F.Dr AmountCr Amount
4-April-16Wages  A/c         
To Cash A/c
 750  750
  • April 6, Deposit into Axis Bank                                                                    100000
DateParticularsL.F.Dr AmountCr Amount
4-April-16Axis Bank A/c         
To Cash A/c
 100000  100000
  1. April 7, Transfer Rs 20000 Axis Bank to UCO Bank
DateParticularsL.F.Dr AmountCr Amount
7-April-16UCO Bank A/c        
  To Axis A/c
 20000  20000

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