Advertisement

The Modern Approach of Accounting

Modern rules of accounting feature image
Modern rules of accounting feature image

Advertisement

The Journal is the basis of the accounting system, In Journal we record day to day transaction of business. For journalizing day to day transaction of the business, we have to know about two types of principles/ Rules/ Modern Approach of Accounting shown in the diagram below.

Advertisement

chart of rules of accounting chart of rules of accounting
modern Rules of Accounting - Explained with Animated Examples

Subscribe our Youtube Channel

If you did not read our article on Traditional/Golden rules of accounting then click here

3 Golden rules of Accounting | Concepts behind it Explained with examples

Explanation of Modern rules of Accounting:

Now, We will explain all these five Modern rules of Accounting individually with examples:

Type of Accounts DebitCredit
1. Capital AccountIncrease Decrease
2. Assets AccountDecreaseIncrease 
3. Liabilities AccountIncrease Decrease
4. Expenses AccountDecreaseIncrease 
5. Income AccountIncrease Decrease

1. Capital Account

Advertisement-X

This rule is applicable to all transactions which are related to an owner of the business.

Example of Capital Accounts:– Cash invested by an owner into business, Cash withdraw by an owner from the business, Life Insurance premium paid for the life of the owner,  Etc.

Click here to check the meaning of a Capital.



Now the question: –

Modern rules of accounting Capital rule Modern Approach of accounting | Capital rule

2. Assets Account

This rule is applicable to all assets of the business when an asset is purchased, sold, depreciated or disposed of.

Example of assets Accounts:- Cash, Land and Building, Plant and Machine, Furniture and Fixture, Trademarks, Etc.

Click here to check the meaning of an asset.


Modern rules of accounting Assets rule Modern Approach of accounting | Assets rule

3. Liabilities Account

This rule is applicable to all Liabilities of the business when liability is created, repaid, etc.

Advertisement-X

Example of Liabilities Accounts:- Bank Loan, Mortgage Loan Creditors, Short Term Loans, Etc.

Modern rules of accounting Liabilities rule Modern Approach of accounting | Liabilities rule

4. Expenses Account

This rule is applicable to all Expenses of the business.

Example of Expenses Accounts:- Salary, Wages, Rent, Carriage, Freight, Transportation, Purchases of Goods only, Etc.

Modern rules of accounting Expenses rule The modern approach of accounting | Expenses rule

5. Income Account

This rule is applicable to all Income of the business.

Example of Expenses Accounts:- Sale of goods, Gain on Sale of Assets, Commission Received, Rent Received, Discount Received, Bad Debts Recovery,  Etc.

Modern rules of accounting Income rule Modern Approach of accounting | Income rule

This topic is also available in Hindi. Click Here

Please also check MS Word Receipt Maker Free 
Thanks for reading the topic of Golden rules of Accounting,

Advertisement

Advertisement

error: Content is protected !!