What are the types of accounts in accounting?
According to the traditional approach, there are three types of accounts in accounting:
- Personal Account
- Real Account
- Nominal Account
1. Personal Accounts-
personal accounts are those accounts that relate to persons, Firms, institutions, and companies like… Jay, Vijay, Mohit, Rachit, Poonam, debtors, creditors, Ram&Sons, Bharat company Limited, bank Account, school Account, government Account, Capital, Drawings Accounts, etc. personal accounts are sub-divided into three categories-
- Natural personal accounts – All those accounts which are related to human beings / Persons are called natural personal accounts. such as – Mohit’s Account, Rachit’s Account, Mariya’s Account, Navjot’s Account.
- Artificial(Legal) personal accounts- Those Personal accounts which are created artificially by law, such as corporate bodies and institutions, are called Artificial personal accounts. These accounts do not have a physical existence however, they are recognized as persons in business dealings. Such as Account of Reliance Industries Ltd, Account of Tata company Ltd., Account of State Bank of India, Account of Ram & company, Account of Mohan & son’s, Account of BSNL, LIC, Account of School, Account of Government, etc.
- Representative personal accounts –Accounts that represent a particular person or group of persons directly or indirectly. For example – Capital account, ( Represent Owner), Drawings account, (Represent Owner), Outstanding salary account, ( Represent Employee), Prepaid Rent account, (Represent Landlord) Advance Income Account, Accrued Income account, etc.
Rules of Personal Accounts- Debit the Receiver,Credit the giver
2. Real Accounts –
Real accounts are those accounts that relate to business property and things (excluding debtors) that are owned by the business concern. Real accounts include tangible and intangible real accounts.
Examples of tangible real accounts –
Fixture and fitting account,
Examples of Intangible real accounts –
Rules of Real Accounts- Debit what comes in, Credit what goes out.
3. Nominal Accounts –
Accounts relating to expenses, Losses, Gains, Revenue, etc. are known as Nominal Accounts. These accounts do not have any existence, form, or shape. They relate to Expenses/Losses & Incomes / Gains of a business concern.
For example- Purchase Account, Sales Account, purchases return Account, sales return Account, Rent account, Commission Account, Interest Account, Discount Account, Depreciation Account, Bad debts Account, Salaries Account, Wages Account, Charity Account, Advertisement Expenses Account, General Expenses Account Office Expenses Account, Goods Account, etc.