THREE ACCOUNTING GOLDEN PRINCIPLES
THREE GOLDEN ACCOUNTING PRINCIPLES
We have seen that an account may be related to a person or thing(Tangible or Intangible). While doing business transactions, one may come across numerous accounts that are affected. One has to decide about the accounting treatment for each of the account. The accounts are classified depending on their characteristics.
Let us see what each type of accounts means
Personal Accounts :
As the name suggests these are accounts related to persons
Natural Persons: The persons are natural persons (Human Beings) like Rajini A/c, Shiva A/c, Rani A/c etc.
Artificial persons: The persons could also be artificial persons like Corporates, companies or association of persons, partnership etc. Accordingly, we could have Dr.reddy A/c, Tata A/c, SBI bank A/c, Gupta & Trading A/c etc.
Representative Persons: There could be representative personal accounts as well. Although the individual identify of persons related to these is known, the convention is to reflect them as collective accounts. EX When expenses are payable like Rent payable, Salary Payable, Expense paid in advance, Income received in advance etc.
|PERSONAL ACCOUNT RULE|
These are accounts related to assets (i.e. Properties, Possessions).Depending on their physical existence ,they are classified as follows
Tangible Real accounts: Assets that have physical existence and can be seen, and touched. Ex-Building, land, Machinery, Stock, cash & Vehicle etc.
Intangible Real Accounts: These Assets that don’t have any physical existence but can measured in terms of money and have value attached to them .Ex-Trade mark A/c, Goodwill A/c, Patents & Copy rights, Intellectual Property Rights a/c etc.
|REAL ACCOUNT RULE|
1 Nominal Account: These accounts are related to expense or losses and income or gains Ex- Purchase A/salary A/c, Rent A/c,Sales A/c, commission received A/c. etc.