Rules of debit and credit debit all expenses and

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Rules of Debit and Credit Debit all expenses and losses, Credit all incomes and gains. Modern Classification of Accounts
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32 Address: Plot No 420, Behind Shopprix Mall, Vaishali Sector 5, Ghaziabad 201010 M: 9999907099, 9818932244 O: 0120-4130999 Website: , The accounts are classified according to what is called Modern Classification of Accounts. 1. Assets Accounts : These accounts are accounts of assets and properties such as land and building, plant and machinery, furniture, patents, inventory, etc. 2. Liabilities Accounts : These accounts are that of lenders, creditors for goods, outstanding for expenses, etc. 3. Capital Accounts : They refer to the accounts of the proprietor/partners who invested in the business, e.g., capital account of owner, capital accounts of partners, drawings account, current accounts of partners. 4. Revenue Accounts : These are accounts of incomes and gains. Examples are: sales, discount received, interest received, bad debts recovered, etc. 5. Expenses Accounts : These are accounts which show the amount spent or even lost in carrying on business operations. Examples are: purchases, wages paid, depreciation, rent, discount allowed etc. Q.4. Define Balancing an account. Ans. A balance of an account is the difference between the total of its debit and credit sides. If the total of debit side is more than the total of credit side, the account is said to have a debit balance. It has a credit balance when total of credit side is more than the total of debit side. Q.5. What are the significance of Debit and Credit balance in accounts ? Ans. Singnificance of Debit and Credit balance in accounts are as follows : 1. Credit balance in the Capital Account means amount due to the owner of the business. In other words, the amount invested in the business by the owner. 2. Credit balance in Bank Account, Suppliers Account, etc., means amount payable by the business, i.e., liability of the business.
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33 Address: Plot No 420, Behind Shopprix Mall, Vaishali Sector 5, Ghaziabad 201010 M: 9999907099, 9818932244 O: 0120-4130999 Website: , 3. Debit balance in Cash Account, Bank Account, Debtors Account, means Cash in Hand, Cash at Bank, and amount receivable against sale respectively. 4. Credit balance in Discount Received Account, Interest Received Account, etc., means income earned by the business. 5. Debit balance in Discount Allowed Account, Salary, Rent, Interest Paid Account, etc., means expenses. So, we can briefly say that: (a) A debit balance is either an asset (cash, bank, etc.) or an expenses (salary,rent,etc.); and (b) A credit balance shows the income earned or liability or the amount invested by the proprietor. Very Short Answer Type Questions Q.1. What is an Account ? Ans. An account is a summarised record of transactions at one place relating to a particular head.
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