1. NATURE OF ACCOUNTS & RULES OF DEBIT AND CREDIT
DEFINE ACCOUNT.
A summarized record of business transactions relating to a person or thing is called account.
HOW MANY NUMBERS OF ACCOUNTS ARE IN BRITISH APPROACH?
There are three types of account are in British approach:
 Real account
 Nominal account
 Personal account
DEFINE REAL ACCOUNT (PROPERTY ACCOUNT).
Real account deals with those things which tangible visible or which exist in reality like machinery, building etc.
DEFINE NOMINAL ACCOUNT (PROPRIETARY ACCOUNT)?
Nominal account deals with those things which are intangible or invisible or which do not exist in reality like
salaries rent interest etc.
DEFINE PERSONAL ACCOUNT?
Accounts relating to persons firms companies and industries are personal account like
EXPLAIN THE TERM OF DEBIT AND CREDIT.
If we divided the page into two part then left hand side will be called debit and right hand side will be called credit.
HOW MANY NUMBERS OF ACCOUNTS IN AMERICAN APPROACH.
 Real account
 Nominal account
 Personal account
RULES OF DEBIT AND CREDIT ACCORDING TO BRITISH/TRADITIONAL APPROACH.
ACCOUNTS NAME DEBIT CREDIT
Real Account Coming into Business Going out from Business
Nominal Account Expenses Income
Personal Account Receiving Person Giving Person
HOW MANY NUMBERS OF ACCOUNTS IN AMERICAN APPROACH.
There are five accounts in American approach:
 Assets
 Expenses
 Income
 Liabilities
 Owner equity
RULES OF DEBIT AND CREDIT ACCORDING TO AMERICAN/MODREN APPROACH
ACCOUNTS NAME DEBIT CREDIT
Assets account Increases Decreases
Expenses account Increases Decreases
Income account Decreases Increases
Liabilities Decreases Increases
Owner equity accounts Decreases Increase
PUNJAB COLLEGE OF COMMERCE PROF. HAFIZ MUHAMMAD NAWAZ PAGE 1