3 golden rules or types of accounts

3 golden rules or types of accounts :

 A)    Personal Account

These are accounts of parties with whom the business is a carried on. Personal accounts may be:

·         Accounts of natural or physical persons. Ex: Rama Account, Krishna Account

·         Accounts of artificial or legal persons. Ex: ABC & Co.

·         Representative personal account. Ex: O/S Expenses Account, O/S income Account, Prepaid Expenses Account, Income Received in Advance.

Rule:   Debit the Receiver

             Credit the Giver

B)    Real Account

These are asset accounts that appear in the Balance Sheet. They are referred to as Real Account (or Permanent Accounts) as these are owned by businesses and the balances in these accounts at the end of an accounting period will be carried over to the next period. Ex: Cash Account, Land Account, Building Account etc.

Rule:  Debit what comes in

Credit what goes out

C)    Nominal Account

These are accounts of expenses and losses which a business incurs and income & gains which a business earn in the course of business. Ex: Rent Account, Interest Account.

Rule:   Debit all expenses and losses

Credit all income and gains