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Difference Between Real, Nominal, Personal Accounts

The document discusses the three types of accounts in accounting - personal accounts, real accounts, and nominal accounts - and how the three golden rules of accounting relate to each type. Personal accounts relate to individuals and show amounts owed to/by the business. The rule is to debit the receiver and credit the giver. Real accounts represent business assets and apply the rule to debit increases and credit decreases. Nominal accounts track expenses and income, following the rule to debit expenses and losses and credit income and gains. Each type of account serves a different objective around tracking amounts due, assets, or revenue/costs.

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irfan ullah khan
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2K views1 page

Difference Between Real, Nominal, Personal Accounts

The document discusses the three types of accounts in accounting - personal accounts, real accounts, and nominal accounts - and how the three golden rules of accounting relate to each type. Personal accounts relate to individuals and show amounts owed to/by the business. The rule is to debit the receiver and credit the giver. Real accounts represent business assets and apply the rule to debit increases and credit decreases. Nominal accounts track expenses and income, following the rule to debit expenses and losses and credit income and gains. Each type of account serves a different objective around tracking amounts due, assets, or revenue/costs.

Uploaded by

irfan ullah khan
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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What is the exact difference between real, nominal and personal accounts and

how are the 3 golden rules of accounting linked to it?


In order to keep a proper record of the two aspects of a transaction, due to Double Entry System
being followed, accounts may be classified as :

1. Personal Accounts
The accounts which relate to an individual, firm, company or an institution are called Personal
Accounts. Account of Mohan, Account of Ram, Drawings Account, Capital Account, etc. are examples
of Personal Accounts.

 Rule : “Debit the receiver and Credit the giver”


It means - Debit that person's account who receives something from the business and credit that
person's account that person's account who gives something to the business.

 Objective :
Object of preparing a personal account is to ascertain as to how much amount a personal account
owes to the business, that is, how much amount is due to be received from him and how much
amount is owed to a personal account from the business, that is, how much amount is payable to him

2. Real Accounts

The accounts of all those things whose value can be measured in terms of money and which are the
properties of the business are termed as Real Accounts. Such as cash account, furniture account,
machinery account, building account, Goodwill account, etc.

 Rule : “Debit what comes in Credit what goes out”


According to this rule, whenever any property comes into the business it is debited and when it goes
outside the business it is credited.

 Objective :
These accounts represent various properties owned by a business in terms of money and indicate the
financial position of the business.

3. Nominal Accounts

These accounts include the accounts of all expenses and incomes. For example salaries paid, rent
paid, discount allowed, bad debts, Commission received, interest received discount received, etc.

 Rule : “Debit the expenses and losses and Credit the income and gains”
 Objective :
Nominal accounts are those accounts which are in name only and which do not really exist. The
accounts are open simply to explain the nature of head for which cash has been paid in the absence of
nominal accounts it will be very difficult for the management to know the amount paid separately on
account of salary, rent, commission, etc. As such the nominal accounts provide information
regarding the following :-

(i) Amount spent on various heads in a particular period;

(ii) Income received on various heads in a particular period.

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