ICSE Class 9 Answered

A. Traditional Approach: Rules of Debit and Credit

All accounts are classified into 3 categories for the purpose of recording transactions.

• Personal Account: Accounting transactions relating to persons such as individuals, firms, bank and companies are known as personal accounts. A separate account is opened to record particulars of all transactions in cash and goods.

                 Debit the receiver and credit the giver 

• Real Account: Accounting transactions relating to tangible assets such as properties, goods and cash and intangible assets such as patents and trademark are known as real accounts. A separate account is opened for recording particulars of these assets.

                Debit what comes in and credit what goes out

• Nominal Account: Accounting transactions relating to incomes and expenses and gains and losses of the firm are known as nominal accounts. A separate account is opened to record the particulars of salaries paid, commission received and rent paid.

                Debit all expenses and losses and credit all incomes and gains

 B. Modern Approach: Rules of Debit and Credit

All the accounts are classified into 5 categories for the purpose of recording transactions.

• Assets account                                                         Increase debit                       Decrease credit
• Liabilities account                                                    Increase credit                      Decrease debit
• Capital account or owner’s equity account               Increase credit                      Decrease debit
• Expenses or losses account                                  Increase debit                       Decrease credit
• Incomes or gains account                                      Increase credit                      Decrease debit