Accounting principles are like laws that are made by Accounting Standards to be used in business so that all tractions and records are kept clear and fair. So Accounting Principles are some policy or norms of accounting, on which whole accounting is based. Example of accounting principles are business entity concept, money measurement concept, cost concept, double entry concept etc.
There are three types of accounting principles:-
Personnel Account : - A personal account is basically an account recording entries regarding its creditors or debtors. A debtors and creditors accounts are examples of personal accounts. All accounts which are related to persons are called personal account. Personal Account may be used generically for financial accounts at banks and for service accounts such as accounts with the phone company, or even for e-mail accounts.
All Accounts which can be attached to a personality or Organisation. It can be either an Asset or Liability say an organisation buys good on credit from Mr. X for 1000 $ so here the Account of Mr. X is a Personal Account and will be a creditor i.e. liability.
Accounting Rule for Personal Account is Credit the Benefit Giver and Debit the Benefit Receiver
Real Account: - Real account is the elements of accounts which represent assets that may be tangible and intangible. Tangible assets like car, Furniture and intangible assets Like Goodwill, Patents. The Accounting rule for Real Account is debit what comes in and credit what goes out.
Asset, liability, reserves, and capital accounts that appear on a balance sheet. The balances of real accounts are not cancelled out at the end of an accounting period but are carried over to the next period.
Real account is a one of the classification of accounts. Its for recording cost of assets and properties in the books of accounts example land, plant, cash, inventories, investment etc..
Nominal Account: - Nominal accounts are just headings, under which you analyses your income and expenditure. Nominal accounts in accounting are the temporary accounts, such as the income statement accounts. In other words, nominal accounts are the accounts that report revenues, expenses, gains, and losses.
Nominal or temporary accounts are closed at the end of each accounting year. This means that their account balances are transferred to a permanent account. This closing process allows the nominal accounts to start the next accounting year with zero balances.
There are four types of nominal accounts:
Profit & Loss Accounts (periodic)
1. Sales - everything you derive income from
2. Purchases - everything you have to buy to run your business
Balance Sheet Accounts (on-going)
3. Banks - Your entire bank accounts (including client, deposit and savings)
4. Controls – On going totals maintained by the system (e.g. Debtors, Creditors, etc)
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