Definition: Book Keeping, Accountancy, Accounts and its types.

Definition of Book Keeping:

Book Keeping is the art of recording transactions in terms of money or money's worth systematically in a set of books so that the financial position of an undertaking and its relationship to both its proprietors and outsiders can be readily ascertained at any time.

R.N. Carter defines it as follows, "Book keeping is the science and art of correctly recording in books of accounts all those business transactions that result in the transfer of money or money's  worth". Carter's definition of book keeping contains the following elements:

1. The application of knowledge in certain rules, regulations and theories;

2. Writing up transactions in a set of books.

3. The transactions taken place in money or money's worth i.e financial transactions;

4. Regular and correct recording of transactions.

5. Providing preliminary records for further processing by an accountant.

Summary:

         Book-keeping may be defined as the science and art of identifying and recording accounting transactions having documentary evidence systematically in the proper books of accounts. It is concerned with journal, ledger, cash book and other subsidiary books but not with disclosing or interpreting the results of the business.

Definition of Accountancy:

Accounting is defined by American Institute of Certified Public Accountant (AICPA) “as an art of Recording, Classifying and Summarizing in a    significant   manner and in the terms of money. Transactions & events which are part at least of financial character and interpreting the results thereof” 

What is  Accountancy?

Ans: Accountancy is the practice of recording, classifying, and reporting on business transactions for a business. It provides feedback to management regarding the financial results and status of an organization.

Types of  Accounts?

Personal Accounts :  

The accounts which relate to persons.Personal accounts include the following.

i) Natural Persons : 

 Accounts  which  relate  to  individuals.  For example, Mohan’s A/c,  Shyam’s  A/c etc.

ii)  Artificial  persons :  

Accounts   which  relate to  a group  of  persons or firms or institutions.  For  example,  HMT Ltd., Indian Overseas  Bank, Life Insurance Corporation of India, Cosmopolitan club etc.

iii) Representative Persons: 

Accounts which represent a particular person or group of  persons. For example, outstanding salary account, prepaid insurance account, etc.

Real Accounts:  

 Accounts relating to properties and assets which are owned by the business concern. Real accounts  include  tangible and intangible accounts. For  example, Land,  Building, Goodwill, Purchases, etc.

Tangible Real Accounts:

Tangible real accounts are related to things that can be touched and felt physically. Few examples of tangible Real Accounts are cash, stock, building, machinery, furniture land, etc.

Intangible Real Accounts:

Intangible real accounts are related to things that can't be touched and felt physically. Few examples of such real accounts are trademarks, patents, goodwill, etc.

Nominal Accounts:   

These  accounts  do  not have any existence, form or shape. They relate to  incomes   and   expenses and  gains and losses of a business concern. For example, Salary Account, Dividend Account, etc.

(a) Classify the following items into Personal, Real and Nominal Accounts.

1.Capital 2. Sales 3. Drawings 4. Outstanding salary 5. Cash 6. Rent

7. Interest paid  8. Indian Bank  9. Discount received  10. Building

11. Bank 12. Chandrasekar 13. Murugan Lending Library

14. Advertisement 15. Purchases.