When creating an account you need to select the nature of the account. This is an important step as the nature of the account will determine that the account will be available for use at which place and how to be presented in the Profit and Loss Account or Balance Sheet.
Please choose the nature of account wisely at time of adding account as there are certain restrictions on change in nature of account.
A complete list of all available nature of the account and their description is given below.
Cash – Cash account is created automatically when you created a new organization. You can create different cash accounts for maintaining cash balance in different branches or with different employees.
Bank – Your bank accounts.
Bank OD/CC – Your overdraft or cash credit accounts or your credit card.
Debtors – Debtors are the persons to whom you had sold goods or provided services. You can also create cash sales without creating a debtor account. If you make sales to a person and also purchases from that same person then you can create that person’s account with either debtor or creditor nature. It will not make a difference.
Deposit Asset – Deposit account can be created for safety deposits with electricity, water departments etc. It can also be used for Fixed deposits in a bank, deposit with friend or family etc.
Current Asset – Current assets are short-term assets which can be liquefied in a short period of time. Although cash, bank balance, deposits, debtors, stock are also current assets but there is a separate option for them. You can use the current asset option when they don’t find in any such other option.
Fixed Asset – Fixed assets are the assets which have a long life and are not meant for sale. For example, land, building, furniture, vehicles, mobile etc.
Investment – Investment nature can be used for shares, debentures, investment in other business, mutual funds etc.
Loans and Advances – Asset – Loands and Advances – Asset can be used for loans and advances given to other persons. Advance made to a company for purchase of machinery should come under this nature. Advance payment of tax can be classified as deposit or advances.
Misc Asset – Assets which cannot be classified in other nature can be classified as misc asset. For example, a organization made a huge expenditure on advertisement and thus want to write it over 3 years (amortisation of expenses). So it can make an asset with this nature.
Stock – Stock is the goods in which you deals. If you had selected only services option while creating organization then this option will not come in your books. A stock account is already created in your books if you had selected products or products & service option.
Creditors – Creditors are the persons from whom you had purchased goods or services. If you make sales to a person and also purchases from that same person then you can create that person’s account with either debtor or creditor nature. It will not make a difference.
Current Liabilities – Current liabilities are short-term liabilities which are to be paid in a short period of time. Although creditors, duties and taxes are also current liabilities but there is a separate option for them. You can use the current liabilities option when they don’t find in any such other option.
Capital – Capital is the amount which belongs to the owner(s) of business. Account with nature of capital is required to be created for propritor or partner of business.
Duties and Taxes – Account with this nature is required to be created if you are required to pay mandi tax etc. All other taxes are merged into GST and you need not set GST account in RefineBooks.
Misc Liabilities – Liabilities which cannot be classified in other nature can be classified as misc liabilities.
Provisions – An organisation may create provision for any future losses or expenses. For any such purpose, an account with provision nature is to be created. Mostly, companies are required to be created to such provision.
Reserves – A reserve is profits that have been appropriated for a particular purpose. Reserves are sometimes set up to purchase fixed assets, pay an expected legal settlement, pay bonuses, pay off debt, pay for repairs and maintenance.
Secured Loan – Loan which is secured with any collateral assets is known as secured loan.
Unsecured Loan – Loan which is not secured with any collateral assets is known as unsecured loan.
Income and Expenses Accounts
Sales – Sales account is used for recording your revenue. One sale account is automatically created in RefineBooks. You can also create additional sales account.
Purchase – Purchase account is used for recording purchase of goods or services. One Purchase account is automatically created in RefineBooks. You can also create additional Purchase account.
Direct Income – Direct income is one which is earned directly by way of business activities. For example, installation income earned by an electronic shop. It is shown in the trading account and thus added to the gross profit.
Indirect Income – Indirect income is one which is earned by way of non-business activities. For example, interest on bank deposits, sale of carton boxes, etc. It is shown in the profit and loss account and thus added to the net profit.
Direct Expense – Direct expenses are a part of the prime cost or the cost of goods/services sold by a organization. For example cartage inward.
Indirect Expense – Indirect expenses are administrative expenses of the organisation. For example, salary, depreciation.
An expense may be direct or indirect according to the nature of the business. For example, electricity expense of factory is direct expense for a manufacturing organization while electricity expense of showroom for a trader is an indirect expense.
A suspense account is an account in the general ledger in which amounts are temporarily recorded. The suspense account is used because the proper account could not be determined at the time that the transaction was recorded.