Delhi Public School Bangalore East
(Cambridge)
Academic Session 2025-26
ACCOUNTING PROCEDURES
ACCOUNTING PROCEDURES
• Account is a record of transactions under a particular head. It records
not only the amount of transactions but also their effect and
directions.
• An account is divided into two parts, i.e., debit and credit. It is usually
in a “T” form.
• Name of the account is written at the top.
• Account is divided into two identical halves, separated by a thick
vertical line.
• Left hand side is called the debit side
• Ridht hand side is called the credit side.
• Date of the transaction is entered in the column for ‘Date’
• In the particulars column the name of the other account involved in the
transaction is entered.
• The folio column is used as a referencing system where the original entry
was recorded in the journal book.
• In the last column the amount of the transaction is written.
• Dr CASH ACCOUNT Cr
Date Particulars Folio $ Date Particulars Folio $
(Increase) (Decrease)
Meaning of debit and credit
• Debit refers to the left side of an account and credit refers to the right
side of an account. An item recorded on the debit side of an account
is said to be debited to the account. An item recorded on the credit
side of an account is said to be credited to the account.
• Both debit and credit may represent either increase or decrease
depending upon the nature of an account. The rules of debit and
credit depend on the nature of account.
RULES OF DEBIT AND CREDIT
• Under double entry system of accounting each transaction has two
aspects. One aspect is debit, i.e., receiving or income aspect. Another
aspect is credit, i.e., giving or outgoing aspect. Debit and credit
aspects of transaction form the basis of double entry system.
• This is classified based on the type of the account.
• Personal, Real and Nominal
• Personal account:
• In accounting, a Personal Account refers to accounts related to individuals, firms,
companies, or organizations. These accounts represent people or entities with whom
the business has financial dealings.
Definition of Personal Account:
• "Accounts that relate to a person or organization."
Types of Personal Accounts:
[Link] Personal Account – Actual living individuals
e.g., Raj’s Account, Priya’s Account
[Link] Personal Account – Legal entities or organizations
e.g., Infosys Ltd. Account, HDFC Bank Account
[Link] Personal Account – Accounts that represent a group of people or a
person indirectly
e.g., Outstanding Salaries Account, Prepaid Rent Account
(These represent the amount payable or receivable on behalf of others.)
Golden Rule for Personal Account:
• "Debit the receiver, Credit the giver.“
Example:
If ₹1,000 is paid to Raj:
• Raj's Account → Debited (He is the receiver)
• Cash Account → Credited (Cash is going out)
REAL ACCOUNT:
• A Real Account is an account that relates to assets and properties—either tangible
or intangible. These accounts are permanent accounts and are not closed at the end
of the accounting year; their balances are carried forward to the next year.
Types of Real Accounts:
[Link] Real Accounts – Physical assets that you can touch
e.g., Cash Account, Furniture Account, Building Account, Machinery Account
[Link] Real Accounts – Non-physical assets with value
e.g., Goodwill Account, Patent Account, Trademark Account
Golden Rule for Real Account:
• "Debit what comes in, Credit what goes out."
Example:
If the business buys a computer for ₹40,000 in cash:
• Computer A/c (Asset) → Debited (Computer is coming in)
• Cash A/c → Credited (Cash is going out)
NOMINAL ACCOUNT:
• A Nominal Account is an account that deals with expenses, losses, incomes, and gains.
These accounts are temporary and are closed at the end of each accounting year,
transferring the balance to the capital account or profit and loss account.
Examples of Nominal Accounts:
• Expenses & Losses: Rent, Salaries, Wages, Interest Paid, Loss by Fire
• Incomes & Gains: Commission Received, Rent Received, Interest Earned
Golden Rule for Nominal Account:
• "Debit all expenses and losses,
Credit all incomes and gains."
Example:
If the business pays ₹10,000 as salary:
• Salary A/c → Debited (Expense)
• Cash A/c → Credited (Cash going out)
If the business receives ₹5,000 as interest:
• Cash A/c → Debited (Cash coming in)
• Interest Received A/c → Credited (Income)
Type of Account What it Relates To Examples Golden Rule Account Nature
Ram’s A/c, SBI
Can be natural,
Individuals, firms, Bank A/c, Debit the receiver,
Personal artificial, or
organizations Outstanding Rent Credit the giver
representative
A/c
Cash A/c, Building Debit what comes
Assets (tangible & Permanent
Real A/c, Furniture A/c, in, Credit what
intangible) account
Goodwill A/c goes out
Debit all expenses
Rent A/c, Salary
Expenses, losses, and losses, Credit Temporary
Nominal A/c, Commission
incomes, gains all incomes and account
Received A/c
gains
• If a prefix or suffix (Outstanding , Prepaid or Accrued) is added to a
Nominal Account it becomes a Personal Account.
Nominal Account Personal Account
1. Interest A/c Outstanding Interest A/c, Interest
Received in advance A/c, Prepaid
Interest A/c
2. Rent A/c Outstanding rent A/c, Prepaid Rent
a/c
3. Salary A/c Outstanding Salaries A/c, Prepaid
Salaries A/c
4. Commission A/c Outstanding commission A/c, Prepaid
Commission A/c
THANK YOU
