Some More Thumb Rules for Accounts

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In our last lesson we have learn purpose of starting this blog

In my last article , We have seen a bit of basic Thumb Rules for accounting. Here are a few more Thumb rules for accounts which are for ever, every where.

In Accounts, there are 3 (Three and only Three ) Master or Parent Account Head

1. Individual Accounts
2. Goods/Assets Accounts
3. Profit/Loss or Income/Expenses Accounts

Please remember these are the basic Parent under which all other account head or individual ledger or even account group falls

Let we go in a lengthly understanding

1. INDIVIDUAL ACCOUNTS

All accounts representing to any individual, firm, organization, company, whether naturally or have existence due to law are falls under this master head

–For E.g. Mahesh (a proprietor/ Partner/director of a firm is knowing as an individual accounts
— Bank e.g. ICICI bank, HDFC bank or any bank, or such organisation firms are falls under this account.
— Creditors of debtors / employees falls under this account

2. Goods/ Assets Accounts

In accounts the articles which are dealing by a particular firm is always known as ” GOODS” for that particular firm while other assets which are necessary or associate the firm to deal in business is known as assets

For. e.g. Table, chair, etc. furniture are called goods for a furniture trading of manufacturing company . however the same will be treated as assets for a cement manufacturer or trading company or any other company.

Cash, Bank Balances, stock, movable, non movable assets, assets like goodwill, trade mark etc. are always falls under the Goods/ Assets Accounts

3. PROFIT/LOSS OR INCOME/EXPENSES ACCOUNT

Any gain, profit or loss damages etc are falls under this accounts.
for e.g. damage by fire or profit on sale of assets, loss of money by whatever way etc.

The purpose of these classification is very important cause entire accounting entries depends on the class to which a particular transaction belongs.

In my next article I will explain the BASIC ACCOUNTING ENTRY RULES FOR ALL THESE 3 MAIN ACCOUNT HEAD

Once you properly understood these 3 Basic accounts and the basic rules of entry for all these 3 account head then you have did 25% of accounts knowledge completed and rest will be very easy.