Types/ Kinds of Accounts

All the accounting heads used in an organizational accounting system are derived into three kinds or types.

Personal Accounts

The elements or accounts which represent persons and organizations.

Personal accounts refers to all the transactions related to natural persons, artificial persons and representative persons eg- rama, krishna, krishna and radha.

Rule - debit the receiver and credit the giver.

Real Accounts

Real accounts are those reported in the balance sheet, which is the summary of assets, liabilities and owner's equities of business. The label real refers to the continuous, permanent nature of this type of account.

Real accounts are active from the first day of business to the last day. (A real account have a temporary zero balance, in which case it's not reported in the balance sheet). Real accounts contain the balances of assets, liabilities, and owners equities at a specific point in time, such as at the close of business on the last day of the year.
A real account is a record of the amount of asset, liability or owners equity at a precise moment in time. The balance in a real account is the net amount after subtracting decreases from increases in the account.

There are two types of Real accounts Tangible and Intangible

Tangible - Capable of being perceived by the senser or the mind; especially capable of being handled or touched or felt.
Intangible - There are assets which are intangible like the organizations Goodwill.


Real accounts eg- buildings, machinery, cash etc.
Rule - Debit what comes in and Credit what goes out.

Nominal Accounts

Nominal accounts are those reported in the income statement, which is the summary of the revenue and expenses of a business for a period of time.
Nominal accounts includes all the transactions related to expenditure , incomes, losses and profits.

Eg- rent paid, rent received, bad debts, profit on sale of asset.
Rule - Debit all expenses and losses and credit all incomes and profits.

Nominal (Revenue and Expense) account balances are closed at the end of the year
Accumulated amounts in these accounts of sales and expenses for the year 2005 for example, their balances are closed. Their balances are reset to zero to start of the year 2006.

Retained Earnings account define the (P&L Account) to be used for posting the expenditure and income of the year. The balance of this account appears as Reserves and Surplus in the Balance Sheet for the year.