JAIIB- PERSONAL accounting rule-1

Rule FOR PERSONAL ACCOUNTING:

I was quite confused with what A REAL ACCOUNT is and which one is PERSONAL ACCOUNT. It was when I appeared for my CAIIB-PART.1, because I was a non-commerce graduate!

Some of you might have been baffled with this unknown mystery ‘DEBIT-CREDIT’ which sometimes look tougher than rocket technology..

Let me share some ideas, (not very scientific), with you about personal and real accounts and HOW I had overcome them.

HERE it is not RULES but ROLES which we have to play. Are you ready to play?

Imagine that you are looking after SAVINGS BANK DESK. Ram comes there and enquires about his balance. As a responsible banker and with all politeness, you inform him that it is (CREDIT BALANCE)10,200. NOW, Ram remits Rs1200- to his account. What will you do? You credit the amount to his account. Then, the balance increases to Rs.11400-. Correct...?

Analyze the transaction. When he GAVE money to BANK for his account, in order to increase his balance, you added/CREDITed his account: HE GAVE AND YOU CREDITED; “CREDIT the GIVER.”

He comes again the next day; He gives a cheque for Rs. 5000-. The balance has to come down. Isn’t it? You debit his account. So balance is decreased to 6200. Okay!

Analyze this transaction When he drew a cheque for Rs,5000-, you reduced the balance. You DEBITED the amount AND he RECEIVED the cash. DEBIT THE RECEIVER. This is PERSONAL ACCOUNT.

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All creditors/liabilities have credit balances. So, when they GIVE something/money to us, we have to add them, you CREDIT them with money/value. Remember ‘CREDIT THE GIVER’. The reverse is the order when they receive money: DEBIT THE RECEIVER.

 Play the ROLE and find it yourself.

Any short cut to find out PERSONAL ACCOUNTS...?

In GENERAL all LIABILITIES (WHO HAVE LENDED MONEY TO BUSINESS) appearing on the balance sheet are PERSONAL ACCOUNTS.

Let us understand REAL ACCOUNTS later.

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