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    Real, Personal and Nominal Accounts

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    arsalan Shahzad
    There are three main types of accounts in accounting: real accounts, personal accounts, and nominal accounts. Real accounts include tangible and intangible assets. Personal accounts are classified as natural, artificial, or representative and relate to individuals or entities. Nominal accounts relate to expenses, losses, incomes, and gains. The document provides examples and rules for debiting and crediting transactions for each type of account.

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    Real, Personal and Nominal Accounts

    Uploaded by

    arsalan Shahzad
    5K views3 pages
    There are three main types of accounts in accounting: real accounts, personal accounts, and nominal accounts. Real accounts include tangible and intangible assets. Personal accounts are classified as natural, artificial, or representative and relate to individuals or entities. Nominal accounts relate to expenses, losses, incomes, and gains. The document provides examples and rules for debiting and crediting transactions for each type of account.

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    Accounts Types

    Original Title

    Accounts Types

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    There are three main types of accounts in accounting: real accounts, personal accounts, and nominal accounts. Real accounts include tangible and intangible assets. Personal accounts are classified as natural, artificial, or representative and relate to individuals or entities. Nominal accounts relate to expenses, losses, incomes, and gains. The document provides examples and rules for debiting and crediting transactions for each type of account.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    5K views3 pages

    Real, Personal and Nominal Accounts

    Uploaded by

    arsalan Shahzad
    There are three main types of accounts in accounting: real accounts, personal accounts, and nominal accounts. Real accounts include tangible and intangible assets. Personal accounts are classified as natural, artificial, or representative and relate to individuals or entities. Nominal accounts relate to expenses, losses, incomes, and gains. The document provides examples and rules for debiting and crediting transactions for each type of account.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 3

    Real, Personal and Nominal Accounts

    There are mainly three type of accounts in accounting: Real, Personal and Nominal
    accounts, personal accounts are classified under three subcategories: Artificial, Natural
    and Representative. If you fail to identify an account correctly as either a real, personal
    or nominal, in most cases, you will get the journal entries incorrect.

    1. Real Accounts
    All assets of a firm, which are tangible or intangible, fall under the category Real
    Accounts.

    Tangible real accounts are related to things that can be touched and felt physically.
    A few examples of tangible real accounts are building, machinery, stock, land, etc.

    Intangible real accounts are related to things that cant be touched and felt physically.
    A few examples of such real accounts are goodwill, patents, trademarks, etc.

    Golden rule for real accounts

    Debit what comes in


    Credit what goes out

    Example

    The transaction below shows the interaction of two different real accounts:
    one is furniture and the other is cash, both of them are assets of the company and
    hence classified as real accounts.

    Purchased furniture for 10,000 in cash

    Accounts Involved Debit/Credit Rule Applied


    Furniture A/C Debit Furniture is real a/c so Dr. What comes in
    To Cash A/C Credit Cash is a real a/c so Cr. What goes out
    *Amount will be 10,000 in both debit and credit.
    2. Personal Accounts
    These accounts are related to individuals, firms, companies, etc. A few examples of
    personal accounts include debtors, creditors, banks, outstanding/prepaid accounts,
    accounts of credit customers, accounts of goods suppliers, capital, drawings, etc.

    Natural personal accounts: This type of personal accounts is the simplest to


    understand out of all and includes all gods creations who have the ability to deal,
    who, in most cases, are people. E.g. Kumars A/C, Adams A/C, etc.

    Artificial personal accounts: Personal accounts which are created artificially by law,
    such as corporate bodies and institutions, are called Artificial personal
    accounts. E.g. Pvt Ltd companies, LLCs, LLPs, clubs, schools, etc.

    Representative personal accounts: Accounts which represent a certain person or a


    group directly or indirectly.E.g. Lets say that wages are paid in advance to an employee
    a wage prepaid account will be opened in the books of accounts. This wages prepaid
    account is a representative personal account indirectly linked to the person.

    Golden rule for personal accounts

    Debit the receiver


    Credit the giver

    Example

    The transaction below demonstrates the interaction between two different


    personal accounts, one of which is a private limited company and the other one is a
    bank.

    Paid Unreal Pvt Ltd. 24,000 by check

    Accounts Involved Debit/Credit Rule Applied


    Unreal Pvt Ltd. A/C Debit Artificial personal so a/c Dr. the receiver
    To Bank A/C Credit Artificial personal so a/c Cr the giver
    *Amount will be 24,000 in both debit and credit.
    3. Nominal Accounts
    Accounts which are related to expenses, losses, incomes or gains are called Nominal
    accounts. The dictionary meaning of the word nominal is existing in name only and
    the meaning remains absolutely true in accounting sense too, because nominal
    accounts do not really exist in physical form, but behind every nominal account money
    is involved. E.g. Purchase A/C, Salary A/C, Sales A/C, Commission received A/C, etc.

    The final result of all nominal accounts is either profit or loss which is then transferred to
    the capital account.

    Golden rule for nominal accounts

    Debit all expenses & losses


    Credit all incomes & gains

    Example

    The following example shows a transaction where a nominal account deals with a real
    a/c.

    Purchased good for 15,000 in cash

    Accounts Involved Debit/Credit Rule Applied


    Purchase A/C Debit Nominal A/C so Dr. all expenses
    To Cash A/C Credit Real A/C so Cr what goes out
    Amount will be 15,000 in both debit and credit.

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