Question

Discuss various types of ledger accounts.

Answer 1

A ledger is the principal book of accounts in which all transactions of a business are classified and summarised under appropriate heads. Ledger accounts can be broadly classified into three categories:

1. Personal Accounts: These accounts relate to persons, firms, or organisations. They show the amount receivable from or payable to different parties. Examples include:
   Rule: Debit the receiver, Credit the giver.
   
   • Ram’s A/c, Hari’s A/c, Kishan Lal & Sons A/c (individuals and firms)
   • Capital A/c, Drawings A/c (owner/partners)
   • Debtors’ A/c, Creditors’ A/c
2. Real Accounts: These accounts relate to the assets and properties of the business, whether tangible or intangible.
   Rule: Debit what comes in, Credit what goes out. Balances of real accounts are carried forward to the Balance Sheet.
   
   • Tangible Assets: Land, Building, Machinery, Furniture, Cash, Bank A/c.
   • Intangible Assets: Goodwill, Patents, Trademarks.
3. Nominal Accounts: These accounts record expenses, losses, incomes, and gains.
   Rule: Debit all expenses and losses, Credit all incomes and gains.
   • Examples: Rent A/c, Salary A/c, Wages A/c, Discount A/c, Commission Received A/c.

Debit side of a nominal account shows expenditure or loss, while the credit side shows income or gain. The balance is transferred to the Profit and Loss Account to ascertain net profit or net loss.