Accounts recording transactions with a person or group of persons are known as personal accounts. These accounts are necessary, in particular,to record credit transactions.
Personal accounts are of the following types:
(a) Natural persons: An account recording transactions with an individual
human being is termed as a natural persons’ personal account. eg., Kamal’s account,
Mala’s account, Sharma’s accounts. Both males and females are included in it
(b) Artificial or legal persons: An account recording financial transactions
with an artificial person created by law or otherwise is termed as an artificial person,
personal account, e.g. Firms’ accounts, limited companies’ accounts, educational
institutions’ accounts, Co-operative society account.
(c) Groups/Representative personal Accounts: An account indirectly
representing a person or persons is known as representative personal account. When
accounts are of a similar nature and their number is large, it is better tot group them
under one head and open a representative personal accounts. e.g., prepaid insurance,
outstanding salaries, rent, wages etc.
When a person starts a business, he is known as proprietor. This proprietor is
represented by capital account for all that he invests in business and by drawings
accounts for all that which he withdraws from business. So, capital accounts and
drawings account are also personal accounts.
The rule for personal accounts is: Debit the receiver
Credit the giver
Accounts relating to properties or assets are known as ‘Real Accounts’, A
separate account is maintained for each asset e.g., Cash Machinery, Building, etc.,
Real accounts can be further classified into tangible and intangible.
(a) Tangible Real Accounts: These accounts represent assets and properties
which can be seen, touched, felt, measured, purchased and sold. e.g. Machinery
account Cash account, Furniture account, stock account etc.
(b) Intangible Real Accounts: These accounts represent assets and properties
which cannot be seen, touched or felt but they can be measured in terms of money.
e.g., Goodwill accounts, patents account, Trademarks account, Copyrights account,etc.
The rule for Real accounts is:
Debit what comes in
Credit what goes out
Accounts relating to income, revenue, gain expenses and losses are termed as
nominal accounts. These accounts are also known as fictitious accounts as they do not
represent any tangible asset. A separate account is maintained for each head or
expense or loss and gain or income.
Wages account, Rent account Commission account, Interest received account are some examples of nominal account
The rule for Nominal accounts is:
Debit all expenses and losses
Credit all incomes and gains