Classification of assets and liabilities – Answer

Classify the following accounts – in the correct group

Example = Cash on hand = A = CA
(Refer Keywords = A, L, OE, NCA, CA, NCL, CL )
OE = owners’ equity = capital

NCA /CA /
Account A / L /OE
NCL / CL

1. Land* A NCA

2. Office fax machine, office computers, office

A NCA
equipment

3. Freehold premises, Premises A NCA

4. Factory building, office building, building A NCA

5. Fitting and fixtures, showcase and shelves,

A NCA
furniture

6. Equipment, machinery, Plant and Machinery A NCA

7. Motor vehicle, Delivery van A NCA

8. Trademarks, Brand name Patents Copy right

A NCA
Goodwill

9. Bank fixed deposit / investments A NCA

10. Loan to Employee A CA

11. Trade Debtors, trade receivable, Money owed

from customers, customers Dr. Bal, customer
A CA
X, Debtors = (all these are generally for
goods)
12. Stock / inventory / goods / stock of goods /
(commodity or product in which we are A CA
dealing)
13. Stock of Office stationery A CA

14. Cash on hand, cash register, cash, cash

A CA
balance

15. Bank, cash at bank, Bank (Dr.), bank balance A CA

16. Other receivables , Prepaid / paid in advance

A CA
Ch. 11
17. Capital, Owners’ Equity, Equity, owner’s
contributions, net worth, Investment from the
OE / C
owner, Money put into the business by the
owner

18. Mortgage on land and building L NCL

19. Loan from the finance company , Loan from

Mr. John (4 yr), Loan - $1000 , Loan - $10,
L NCL
Loan from KBZ bank (3 yrs.), Bank Loan, Loan
from ABC bank (13 m)

20. Loan from XYZ Bank (6 m) L CL

21. Bank overdraft, Bank(Cr.) (Ch. 4) L CL

22. Trade creditors, trade payables, Money owed

to the supplier, supplier Y, creditors = (all L CL
these are generally for goods)

23. Other payables ,Outstanding / accrued Ch. 11 L CL

 Classification of income and Expenses – Answer

Account Expenses Income

1. bank charges, interest on loan from bank *

2. Advertising, packaging, staff salaries, wages *

3. Stationary, postage stamps, *

4. travelling expenses, Transport, insurance *

5. Power, water, fuel, electricity *

6. repairs and maintenance, Repairs to building *

7. interest of fixed deposits *

8. gain from sale of motor van *

9. sales or revenue *

10. Carriage inward, Carriage, carriage outward *

11. Discount received *

12. Discount allowed *

13. rent received *

14. Rent paid / payable *

15. interest received *

16. Interest paid *

17. commission received *

18. Commission paid *

Double entry rules
1. Asset Increase debit Asset decrease credit
2. Liability increase credit Liability decrease debit
3. Capital increase credit Capital decrease debit
4. Expenses always debit
5. Income always credit

Steps
1. Select 2 accounts involved
2. Decide type of each account (Asset, Liability, Capital, Expenses, Income)
3. Effect of Transaction (increase or decrease)
4. Action in account (debit or credit)

Inventory / stock / goods = Asset

Instead of goods account = we use purchases /sales / purchases returns /sales
returns account= depending on transaction.

Hints - for trial balance

Accounts generally with Accounts generally with

debit balances credit balances

Drawings Capital

Purchases Revenue / sales

Sales returns Purchases returns

Assets Liabilities

Expenses Income