Page 17 - IC26 LIFE INSURANCE FINANCE

CHAPTER-2

ACCOUNTING PROCESS

UNIT 1 : BASIC ACCOUNTING PROCEDURES –

JOURNAL ENTRIES

1. Double Entry System: According to it every transaction has two fold aspects-debit
and credit. This system is named so because it records both the aspects.

2. Account: It is a T form statement having two sides.

Left side - Debit and Right side - Credit

To analyze the dual aspect of each transaction, two approaches can be followed: -

(1)Traditional Approach: Classification of Accounts

(i) Personal Accounts

(a) Natural A/c: It relates to transactions of human Beings.

(b) Artificial A/c: It relates to transact business entit ies treated as artificial persons.

(c) Representative A/c: These are represented as personal accounts.

(ii)Impersonal Accounts

(a) Real A/c: Accounts which relate to assets of the firm but not debt.

(b) Nominal A/c: Accounts which relate to expenses, losses, gains, revenue etc.

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