Account 6 Marks Question

Personal Accounts:

3. Commission Accrued.

4. Prepaid Salaries.

8. Life Insurance Corporation of India.

9. Drawings A/C.

10. Rent Received in Advance.

11. Debtors.

13. Rent Paid in Advance.

14. Bank Overdraft.

Real Accounts:

5. Leasehold Property A/c.

Nominal Accounts:

1. Commission Paid.

2. Commission Received.

6. Discount Allowed.

7. Carriage Inwards A/c.

12. Sales A/c.

S.No	Transactions	Accounts Involved	Nature of Account	Debit ₹	Credit ₹	Reason
1	Mohan started Business with ₹ 5,00,000 in cash	Cash Capital	Real Personal	5,00,000	5,00,000	Comes in Giver
2	Purchased goods for cash ₹ 1,00,000.	Purchased Cash	Nominal Real	1,00,000	1,00,000	Expenses Goes out
3	Sold goods for cash ₹ 1,50,000.	Cash Sales	Real Nominal	1,50,000	1,50,000	Comes in Income
4	Received interest from Ram in cash ₹ 500.	Cash Interest	Real Nominal	500	500	Comes in Income
5	Sold goods to Ashok for ₹ 60,000.	Ashok Sales	Personal Nominal	60,000	60,000	Receiver Income
6	Purchased furniture for cash ₹ 50,000	Furniture Cash	Real Real	50,000	50,000	Comes in Goes out
7	Paid wages ₹ 20,000	Wages Cash	Nominal Real	20,000	20,000	Expenses Goes out

Meaning of Double Entry System: According to this system every business transaction affects at least two accounts in opposite directions. For example, if the furniture is purchased in the business, furniture is increased whereas the cash is decreased. There can be no transaction in the business which affects only one account or which has only one aspect. As such, both the aspects of every transaction are recorded under this system. It may, however, be noted that the double entry does not mean that a transaction is recorded twice. But it means that at least two accounts are affected by a transaction - one account receiving a benefit and the other account yielding a benefit. The person or the account receiving a benefit is debited and the person or the account who gives something to the business is credited. The amount of every transaction is written twice, once as a debit and again as a credit. For example, we received ₹ 25,000 from Mohan. This transaction affects two accounts - Cash Account and the Mohan's Account. Cash account is receiving a benefit (as cash is coming in) and hence Cash account will be debited, whereas Mohan is yielding a benefit and hence his account will be credited.
Principles or Characteristics of Double Entry System: Double Entry System is based upon the principle that “Every debit has a credit and every credit has a debit”. Following are the important features or essentials of the double entry system.

1. Every bussiness transaction affects two accounts: Every business transaction has a two-fold effect, i.e., it affects two accounts simultaneously. One of them is debited and the other is credited. Certain transactions may affect more than two accounts but the amount of the accounts to be debited and credited will always be equal.
2. Recording of both personal and impersonal aspects: Both personal and impersonal aspects of a transaction are recorded in Double Entry. It is possible that both the aspects of a transaction may be personal or both may be impersonal or one may be personal and the other may be impersonal.

The advantages of Double Entry System are:

1. Scientific System: Double Entry System is a scientific system of recording business transactions as compared to other systems of Book Keeping. It helps attain the objectives of accounting.
2. Complete Record of Transactions: Under the system, both sides of a transaction are recorded. It is a complete record as it results in showing correct income or loss, assets and liabilities.
3. Arithmetical Accuracy of Accounts is Ensured: By the use of this system, arithmetical accuracy of the accounting work can be established throagh the Trial Balance.
4. Determining Profit or Loss: Profit earned or loss incurred during a period can be determined by preparing Profit and Loss Account.

Classification of Accounts
Personal Account		Impersonal Account
Real Account	Nominal Account

Personal Account: The accounts which relate to an individual, firm, company or an institution are called personal accounts. Account of Mohan, Account of Ram Chander Krishan Chander, Account of D.C.M. Limited, Account of Delhi University, Bank Account, Capital Account of the proprietor, Drawings Account of the proprietor etc. are examples of Personal Accounts.
Rule: Rule for recording a transaction in personal accounts in simple words is ‘Debit the receiver and credit the giver'. In other words, "Debit that person's account who receives something from the business and credit that person's account who gives something to the business”.
Real Account: The accounts of all those things whose value can be measured in terms of money and which are the properties of the business are termed as Real Accounts. Such as, Cash Account, Furniture Account, Machinery Account Building Account, Goodwill Account etc.
Rule: Rule for recording a transaction in real account is ‘Debit what comes in and credit what goes out'.
According to this rule, whenever any property comes into the business, it is debited and when it goes outside the business, it is credited.
Nominal Account: These accounts include the accounts of all expenses and incomes. The examples of nominal accounts relating to expenses are Salaries paid, Rent paid, Discount allowed, Bad Debts etc.
The examples of nominal accounts relating to incomes are Commission received, Interest received, Discount received etc.
Rule: Rule for recording in nominal accounts is, “Debit the expenses and losses and Credit incomes and gains”.
Rules of Debit and Credit (Treditional Clsssification) at a Glance:

S.No	Types of Account	Account to be Debited	Account to be Credited
1	Personal Account	Receiver	Giver
2	Real Account	What comes in	What goes out
3	Nominal Account	Expense and Loss	Income and Gain