Nature of Accounts and its meaning

We can say that by nature there are only five accounts in the world and thousands of accounts must be related to any one of the following nature:


  1. Assets
  2. Liabilities
  3. Proprietorship
  4. Revenue
  5. Expenses.

  1. Assets mean the resources of the business or the commodities possessed by the business.

  2. Liabilities mean the claims of the suppliers of cash or commodities or the obligation of the business to pay at a certain period.

  3. Proprietorship means the claims of the owner of the business for his interest up to his investment after finalizing the expenses and revenue up to the date.

  4. Revenue means any type of income directly or indirectly of the business.

  5. Expense means any type of expense directly or indirectly of the business.

Rules for Debit and Credit :

Debit Nature of Accounts Credit

Increase Assets Decrease

Decrease Liabilities Increase

Decrease Proprietorship Increase

Decrease Revenue/ Income Increase

Increase Expenses Decrease