There are credit and debit rules of accounting which is referred as 3 golden rules of accounting. It is also referred as 3 types of accounts in accounting. Let us understand further in detail:
Three Types of Accounts into Accounting system are:
1. Real Account.
2. Personal Account.
3. Nominal Account.
1. Real Account Definition:
Any kind of assets which is either tangible (for example: land, stock, building, etc.) or intangible (for example: goodwill, copyrights, patents, etc.) are categorized into Real Account.
|Frist Golden Rule – Real Accounts|
|Debit what’s come in and Credit what goes out.|
Example of Real Accounts:
Mr. Joe purchased furniture of Rs.75,000/- for cash.
|Furniture A/c||75,000||Debit what’s come in.|
|To Cash A/c||75,000||Credit what goes out.|
Real accounts are one of the three types of accounts. As per the first golden rule of Real Accounts – Furniture A/c is debited with Rs.75,000/- and Cash A/c is credited with Rs.75,000/-.
2. Personal Account Definition:
Those accounts which are either directly or indirectly related to individuals, companies, firms or organisations are known as Personal Account. Example of personal accounts includes: Kumar Account, Xyz Pvt. Ltd. account, capital account, prepaid account, bank account, drawings account, creditors account, outstanding account, debtors account, suppliers account, etc.
|Second Golden Rule – Personal Accounts|
|Debit the receiver and Credit the giver|
Example of Personal Accounts:
Mr. Jennifer paid Rs.45,000/- to Xyz-pqr Private Limited Company by cheque.
|Xyz-pqr Pvt. Ltd.||45,000||Debit the receiver.|
To Bank Account
|45,000||Credit the giver.|
Personal accounts are one of the three types of accounts. As per the second golden rule of Personal Accounts – Xyz-pqr Pvt. Ltd. A/c is debited with Rs.45,000/- and Bank A/c is credited with Rs.45,000/-.
3. Nominal Account Definition:
Those accounts which are associated with income, gains, losses or expenses are known as Nominal Account. At the end remaining balances of nominal accounts are then posted to capital account.
|Third Golden Rule – Nominal Accounts|
|Debit all expenses & losses and Credit all income’s & gain’s|
Example of Nominal Accounts:
Ms. Jenny purchased goods of Rs.22,000/- for cash.
|Purchase A/c||22,000||Debit all expenses & losses.|
To Cash A/c
|22,000||Real A/c: Credit what goes out.|
Nominal accounts are one of the three types of accounts. As per the third golden rule of Nominal Accounts – Purchase A/c is debited with Rs.22,000/- and Cash A/c is credited with Rs.22,000/-.
- Tutorial Course - Basics of Accounting for Beginners -
» e-Learning Chapter 1: What is Accounting and objectives of Accounting?
» e-Learning Chapter 2: What is Assets and Current Assets?
» e-Learning Chapter 3: What is Liability and Current Liabilities?
» e-Learning Chapter 4: What is Revenue and Expenses?
» Currently Reading: What are the Types of Accounts?
» e-Learning Chapter 6: What is a Single Entry System?
» e-Learning Chapter 7: What is Double Entry Accounting System?
» e-Learning Chapter 8: What are the steps involved in Accounting Process Cycle.
» e-Learning Chapter 9: What are Journal Entries? Format and Examples.
» e-Learning Chapter 10: What Is a General Ledger? Format with Example.
» e-Learning Chapter 11: What is a Trial Balance? Examples and Limitations.
» e-Learning Chapter 12: What is a profit and loss statement or Income Statement?
» e-Learning Chapter 13: What is a Balance Sheet? Definition, Format and Examples.
» e-Learning Chapter 14: What are the Different Types of Accounting Methods in Bookkeeping.
» e-Learning Chapter 15: Accounting Quiz – Basics of Accounting for Beginners Module.