Personal Accounts
Accounts recording transactions relating to individuals or firms or company are known as personal accounts. Personal accounts may further be classified as :
(1) Natural person's personal accounts: The accounts recording transactions relating to individual human beings e.g., Anand's A/c, Remesh's A/c, Pankaj's A/c are classified as natural person's personal accounts.
(2) Artificial person's personal account: The accounts recording transactions relating to limited companies. bank, firm, institution, club. etc. e.g. Delhi Cloth Mill; Hans Raj College; Gymkhana Club are classified as artificial persons' personal accounts.
(3) Representative personal accounts: The accounts recording transactions relating to the expenses and incomes are classified as nominal accounts. But in certain cases due to the matching concept of accounting the amount, on a particular date, is payable to the individuals or recoverable from individuals.
Such amount (a) relates to the particular head of expenditure or income and (b) represents persons to whom itis payable or from whom it is recoverable. Such accounts are classified as representative personal accounts e.g. "Wages Outstanding Account", Pre-paid Insurance Account. etc.
Real Accounts
The accounts recording transactions relating to tangible things (which can be touched, purchased and sold) such as goods, cash, building. machinery etc., are classified as tangible real accounts.
Whereas the accounts recording transactions relating to. intangible things (which do not have physical shape) such as goodwill, patents and copy rights. trade marks etc., are classified as intangible real accounts.
Nominal Accounts
The accounts recording transactions relating to the losses, gains. expenses and incomes e.g., Rent, salaries, wages, commission, interest, bad debts etc. are classified as nominal accounts. As already discussed, wherever a nominal account represents the amount payable to or receivable from certain persons it is known as representative personal account.
Rules of Debit and Credit (classification based)
1. Personal Accounts: Debit the receiver, Credit the giver (supplier)
2. Real Accounts: Debit what comes in, Credit what goes out
3. Nominal Accounts: Debit expenses and losses, Credit incomes and gains.,
Hints for Journalizing
The following discussion will help in diagnosing the transaction with a view to find out which accounts are relevant for passing the journal entry.
1. Treatment of cash/credit transaction.
Read carefully the following transactions:
(i) Purchased goods for Rs. 1,200 cash. .
(ii) Purchased goods for Rs. 1,200.
(iii) Purchased goods for Rs. 1,200 from Arun.
(iv) Purchased goods for Rs. 1,200 from Arun on cash.
Transaction (i) and (iv) are clear as it has been specifically stated that purchases have been made on cash. Thus the entry is :
Purchases account Dr. 1,200 To Cash account 1,200
Transaction (ii) and (iii) are not specific as to whether the purchases are for cash or on credit. However transaction (ii) does not mention any name of the supplier; therefore it implies that the purchases are for cash. Similarly transaction (iii) mentions the name of the supplier but is silent regarding cash-it implies that purchases are on credit: Thus the entry for transaction (iii) is
Purchases account Dr. 1,200 To Amex 1200.
2. Treatment of payment on personal/expenses account.
When payment is made to a person against amount due to him as per his ledger account-the personal account of the creditor should be debited. However if the payment is being made to a person representing business expenditure then the particular expenditure (nominal) account should be debited.
3. Treatment of receipt on personal/ income account.
When amount is received from a person against amount recoverable from him as per ledger account-the personal account of the debtor should be credited. However if the amount received represents business income, then the particular income (nominal) account should be credited.
Branches of Accounting, Uses of Accounting and Limitations of Financial Accounting
Accounting vs. Book-keepingBook-keeping concerns itself with the recording (correctly and in a set of books) of those transactions that result in the transfer of money or money's worth. Whereas accounting is comprehensive in perspective. It extends to classifying, summarizing, presenting and even analyzing accounting information .
Accounting vs. Accountancy
Body of knowledge (consisting of principles, postulates, assumptions, conventions, concepts and rules) governing the science of recording classifying and analyzing financial transactions is accounting. Whereas the practice and art of the science of accounting is termed as accountancy.To meet the ever increasing demands made on accounting by different interested parties (such as owners, management, creditors, taxation authorities etc.) the various branches have come into existence. Financial AccountingThe object of financial accounting is to ascertain the result (profit or loss) of business operations during the particular period and to state the financial position (Balance Sheet) as on a date at the end of the period.
Cost Accounting
The object of cost accounting is to find out the cost of goods produced or services rendered by a business. It also helps the business in controlling the costs by indicating avoidable losses and wastes.Management AccountingThe object of management accounting is to supply relevant information at appropriate time to the management to enable it to take decision and effect control.In this web primer, we are concerned only with financial accounting. The objects of financial accounting as stated above can be achieved only by recording the financial transactions in a systematic manner according to a set of principles. The recorded information has to be classified, analyzed and presented in a manner in which business results and financial position can be ascertained.
Uses of Accounting
Accounting plays important and useful role by developing the information for providing answers to many questions faced by the users of accounting information.
(1) How good or bad is the financial condition of the business?
(2) Has the business activity resulted in a profit or loss?
(3) How well the different departments of the business have performed in the past?
(4) Which activities or products have been profitable?
(5) Out of the existing products which should be discontinued and the production of which commodities should be increased.
(6) Whether to buy a component from the market or to manufacture the same?
(7) Whether the cost of production is reasonable or excessive?
(8) What has been the impact of existing policies on the profitability of the business?
(9) What are the likely results of new policy decisions on future earning capacity of the business?
(10) In the light of past performance of the business how it should plan for future to ensure desired results ?
Above mentioned are few examples of the types of questions faced by the users of accounting information. These can be satisfactorily answered with the help of suitable and necessary information provided by accounting.
Besides, accounting is also useful in the following respects :-
(1) Increased volume of business results in large number of transactions and no businessman can remember everything. Accounting records obviate the necessity of remembering various transactions.
(2) Accounting record, prepared on the basis of uniform practices, will enable a business to compare results of one period with another period.
(3) Taxation authorities (both income tax and sales tax) are likely to believe the facts contained in the set of accounting books if maintained according to generally accepted accounting principles.
(4) Cocooning records, backed up by proper and authenticated vouchers are good evidence in a court of law.
(5) If a business is to be sold as a going concern then the values of different assets as shown.
Accounting vs. Accountancy
Body of knowledge (consisting of principles, postulates, assumptions, conventions, concepts and rules) governing the science of recording classifying and analyzing financial transactions is accounting. Whereas the practice and art of the science of accounting is termed as accountancy.To meet the ever increasing demands made on accounting by different interested parties (such as owners, management, creditors, taxation authorities etc.) the various branches have come into existence. Financial AccountingThe object of financial accounting is to ascertain the result (profit or loss) of business operations during the particular period and to state the financial position (Balance Sheet) as on a date at the end of the period.
Cost Accounting
The object of cost accounting is to find out the cost of goods produced or services rendered by a business. It also helps the business in controlling the costs by indicating avoidable losses and wastes.Management AccountingThe object of management accounting is to supply relevant information at appropriate time to the management to enable it to take decision and effect control.In this web primer, we are concerned only with financial accounting. The objects of financial accounting as stated above can be achieved only by recording the financial transactions in a systematic manner according to a set of principles. The recorded information has to be classified, analyzed and presented in a manner in which business results and financial position can be ascertained.
Uses of Accounting
Accounting plays important and useful role by developing the information for providing answers to many questions faced by the users of accounting information.
(1) How good or bad is the financial condition of the business?
(2) Has the business activity resulted in a profit or loss?
(3) How well the different departments of the business have performed in the past?
(4) Which activities or products have been profitable?
(5) Out of the existing products which should be discontinued and the production of which commodities should be increased.
(6) Whether to buy a component from the market or to manufacture the same?
(7) Whether the cost of production is reasonable or excessive?
(8) What has been the impact of existing policies on the profitability of the business?
(9) What are the likely results of new policy decisions on future earning capacity of the business?
(10) In the light of past performance of the business how it should plan for future to ensure desired results ?
Above mentioned are few examples of the types of questions faced by the users of accounting information. These can be satisfactorily answered with the help of suitable and necessary information provided by accounting.
Besides, accounting is also useful in the following respects :-
(1) Increased volume of business results in large number of transactions and no businessman can remember everything. Accounting records obviate the necessity of remembering various transactions.
(2) Accounting record, prepared on the basis of uniform practices, will enable a business to compare results of one period with another period.
(3) Taxation authorities (both income tax and sales tax) are likely to believe the facts contained in the set of accounting books if maintained according to generally accepted accounting principles.
(4) Cocooning records, backed up by proper and authenticated vouchers are good evidence in a court of law.
(5) If a business is to be sold as a going concern then the values of different assets as shown.
Trainee Accounting Jobs - Could You Be A Graduate Accountant?
As an accounting trainee, you would be working with an accountant who is CCAB qualified, who would be in essence your mentor for the field of accountancy. The vast majority of accounting jobs in the UK state that the organization is looking for CCAB-qualified accountants. As a trainee, you could land a job with an organization to train in accounting while you were going to school for accounting to get some hands on experience.
Trainee accounting jobs are quite plentiful within the UK because of the vastness of accounting jobs throughout the area. While accounting may seem boring to some, there is still a need for new, young accountants to enter the field, which is why CCAB-qualified accountants are taking new people under their wings as trainees--to keep a steady flow of accountants who are CCAB-qualified in the ranks.
In the UK, there are different levels of accountants:
Chartered Certified Accountant: A member of the Association of Chartered Certified Accountants whose designation letters would read ACCA or FCCA.
Chartered Accountant: A member of either the Institute of Chartered Accountants in England and Wales, with designation letters of ACA or FCA, the Institute of Chartered Accountants in Scotland with designation letters of CA, The Institute of Chartered Accountants in Ireland with designation letters of ACA or FCA, or any recognized equivalent body from another commonwealth country, such as Canada.
Chartered Management Accountant: A member of the Chartered Institute of Management Accountants, with designation letters of ACMA or FCMA.
Chartered Public Finance Accountant: A member of the Chartered Institute of Public Finance and Accountancy with designation letters of CPFA.
International Accountant: A member of the Association of International Accountants with designation letters of AIAA or FAIA.
Authorized Public Accountant: A member of the Association of Authorized Public Accountants with designation letters of AAPA.
Incorporated Financial Accountant: A member of the Institute of Financial Accountants with designation letters of FFA or AFA.
Trainee accounting jobs are quite plentiful within the UK because of the vastness of accounting jobs throughout the area. While accounting may seem boring to some, there is still a need for new, young accountants to enter the field, which is why CCAB-qualified accountants are taking new people under their wings as trainees--to keep a steady flow of accountants who are CCAB-qualified in the ranks.
In the UK, there are different levels of accountants:
Chartered Certified Accountant: A member of the Association of Chartered Certified Accountants whose designation letters would read ACCA or FCCA.
Chartered Accountant: A member of either the Institute of Chartered Accountants in England and Wales, with designation letters of ACA or FCA, the Institute of Chartered Accountants in Scotland with designation letters of CA, The Institute of Chartered Accountants in Ireland with designation letters of ACA or FCA, or any recognized equivalent body from another commonwealth country, such as Canada.
Chartered Management Accountant: A member of the Chartered Institute of Management Accountants, with designation letters of ACMA or FCMA.
Chartered Public Finance Accountant: A member of the Chartered Institute of Public Finance and Accountancy with designation letters of CPFA.
International Accountant: A member of the Association of International Accountants with designation letters of AIAA or FAIA.
Authorized Public Accountant: A member of the Association of Authorized Public Accountants with designation letters of AAPA.
Incorporated Financial Accountant: A member of the Institute of Financial Accountants with designation letters of FFA or AFA.
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