Answer in One sentence only
1. What is real account?
2. State the meaning of accounting equation.
3. What is rule of debit and credit for nominal account?
4. What do you mean by debit?
5. Give two examples of personal account.
6. What is an account?
7. What is nominal account?
8. Give two examples of real account
9. State whether drawings increases or decreases owner’s equity.
10. State the rule for personal account.
Answer in One sentence only
1. What is real account?
2. State the meaning of accounting equation.
3. What is rule of debit and credit for nominal account?
4. What do you mean by debit?
5. Give two examples of personal account.
6. What is an account?
7. What is nominal account?
8. Give two examples of real account
9. State whether drawings increases or decreases owner’s equity.
10. State the rule for personal account.
1) The accounts of all those things whose value can be measured in terms of money and are treated as assets of a business are classified as real accounts. These accounts are related to the tangible or intangible assets of the business such as Furniture A/c, Goodwill A/c, etc.
2) Accounting equation shows the equality between resources obtained from fund and sources of fund, where resources mean assets and sources of fund refer to the sources from where an enterprise has obtained funds for buying its resources. Thus, in this way, it states that the assets of the business are always equal to the total of capital and liabilities. If there is an increase of assets, as a result of business transactions, there will also be a corresponding increase either in capital or in liabilities of the business with the same amount.
3) Nominal accounts include the accounts of all expenses and incomes of a business. Thus, the rule for recording these transactions is “Debit all expenses and losses and Credit all incomes and gains”.
For example: 1) If Rs 5,000 is paid for salaries, they, being an expense, should be debited and cash account should be credited.
Salaries A/c Dr. (Expense)
To Cash A/c
2) If Rs 2,000 were received as commission, then, commission, being an income, is credited and the cash account is debited.
Cash A/c Dr.
To Commission A/c (Income)
4) Debit originated from the Italian word debito, which, in turn, is derived from the Latin word debeo, which means ‘owed to proprietor’. It is recorded on the left-hand side of the account.
5) All those accounts that are related to an individual, a firm, a company or an institution are termed as personal accounts. It also includes all those accounts which act as a representative of a certain person such as Prepaid Insurance A/c.
Examples of personal accounts are Mohan’s A/c, Account of ANC Ltd., Bank A/c and Drawings A/c.
6) An account is a record of all business transactions relating to a particular person or item. In accounting, a separate record of each individual, asset, liability, expense or income is maintained in a summarised form, for all the transactions that have taken place. For example: Ram’s A/c, Shyam’s A/c, Machinery A/c.
7) These accounts include the accounts of all expenses, losses, incomes and gains. The examples of nominal accounts are salaries paid, rent paid, commission received, discount allowed etc.
8) Accounts of all those things whose value can be measured in terms of money and which are treated as assets of the business, whether tangible or intangible, are classified as real accounts.
Examples of real accounts are Furniture A/c, Goodwill A/c and Machinery A/c.
9) Drawing is the amount withdrawn by a proprietor from the business for his /her personal use. Hence, it decreases the owner’s capital or owner’s equity of the business.
10) Personal accounts include the accounts of all individuals, firms, companies or institutions. Thus, the rule followed under the personal account is “Debit the receiver and Credit the giver”.
For example: - 1) Goods were sold to Hari on credit- In this case, Hari is the receiver and, thus, his account is to be debited and the entry for this is:
Hari Dr. (Receiver)
To Sales A/c
2) Loan is obtained from X- In this case, X is the giver, as the amount is given by him and, thus, Loan from X’s A/c is to be credited and the entry for this is:
Cash A/c Dr.
To Loan from X A/c (Giver)
1) The accounts of all those things whose value can be measured in terms of money and are treated as assets of a business are classified as real accounts. These accounts are related to the tangible or intangible assets of the business such as Furniture A/c, Goodwill A/c, etc.
2) Accounting equation shows the equality between resources obtained from fund and sources of fund, where resources mean assets and sources of fund refer to the sources from where an enterprise has obtained funds for buying its resources. Thus, in this way, it states that the assets of the business are always equal to the total of capital and liabilities. If there is an increase of assets, as a result of business transactions, there will also be a corresponding increase either in capital or in liabilities of the business with the same amount.
3) Nominal accounts include the accounts of all expenses and incomes of a business. Thus, the rule for recording these transactions is “Debit all expenses and losses and Credit all incomes and gains”.
For example: 1) If Rs 5,000 is paid for salaries, they, being an expense, should be debited and cash account should be credited.
Salaries A/c Dr. (Expense)
To Cash A/c
2) If Rs 2,000 were received as commission, then, commission, being an income, is credited and the cash account is debited.
Cash A/c Dr.
To Commission A/c (Income)
4) Debit originated from the Italian word debito, which, in turn, is derived from the Latin word debeo, which means ‘owed to proprietor’. It is recorded on the left-hand side of the account.
5) All those accounts that are related to an individual, a firm, a company or an institution are termed as personal accounts. It also includes all those accounts which act as a representative of a certain person such as Prepaid Insurance A/c.
Examples of personal accounts are Mohan’s A/c, Account of ANC Ltd., Bank A/c and Drawings A/c.
6) An account is a record of all business transactions relating to a particular person or item. In accounting, a separate record of each individual, asset, liability, expense or income is maintained in a summarised form, for all the transactions that have taken place. For example: Ram’s A/c, Shyam’s A/c, Machinery A/c.
7) These accounts include the accounts of all expenses, losses, incomes and gains. The examples of nominal accounts are salaries paid, rent paid, commission received, discount allowed etc.
8) Accounts of all those things whose value can be measured in terms of money and which are treated as assets of the business, whether tangible or intangible, are classified as real accounts.
Examples of real accounts are Furniture A/c, Goodwill A/c and Machinery A/c.
9) Drawing is the amount withdrawn by a proprietor from the business for his /her personal use. Hence, it decreases the owner’s capital or owner’s equity of the business.
10) Personal accounts include the accounts of all individuals, firms, companies or institutions. Thus, the rule followed under the personal account is “Debit the receiver and Credit the giver”.
For example: - 1) Goods were sold to Hari on credit- In this case, Hari is the receiver and, thus, his account is to be debited and the entry for this is:
Hari Dr. (Receiver)
To Sales A/c
2) Loan is obtained from X- In this case, X is the giver, as the amount is given by him and, thus, Loan from X’s A/c is to be credited and the entry for this is:
Cash A/c Dr.
To Loan from X A/c (Giver)
