Types of Accounts: Real, Nominal, Personal

Area

Bookkeeping & Journal

Explanation

Classification of Accounts

Accounts are traditionally classified into three types:

1. Personal Accounts

Accounts related to persons, firms, and companies.
Examples: Debtors, Creditors, Bank Account.
Rule: Debit the Receiver, Credit the Giver.

2. Real Accounts

Accounts related to tangible and intangible assets.
Examples: Building, Machinery, Goodwill.
Rule: Debit what comes in, Credit what goes out.

3. Nominal Accounts

Accounts related to expenses, losses, income, and gains.
Examples: Rent A/C, Wages A/C, Sales A/C.
Rule: Debit all expenses and losses, Credit all incomes and gains.

Modern Approach

Instead of the traditional real/nominal/personal classification, modern accounting uses debit-credit rules based on the fundamental account types: Assets, Liabilities, Equity, Revenue, and Expenses.