Answer Posted / sushant

The business transactions can be grouped under three types of accounts :

Personal accounts
Real accounts
Nominal accounts

Personal Accounts

Personal accounts are the accounts of persons or firms that the business deals with. These are primarily of three types :

Natural person’s account : These are accounts of real persons who transact with the business in various capacities. The proprietor’s account and the accounts of customers are some examples of natural person’s accounts
Artificial person’s accounts : These are accounts of firms and entities that transact with the business. The accounts of a limited companies or banks that are not real persons are the examples of artificial person’s accounts.
Representative personal account : These are accounts that represent certain person or persons. If a business has not paid the rent of a number of shops for the past two months then all landlords are creditors of the business and the amount due to them is recorded under a common head called Rent Outstanding Account. This is a representative personal account. Other examples of representative personal accounts are Interest Outstanding and Interest Paid in Advance accounts.

Real Accounts

Real accounts are the accounts of the properties, assets and possessions of a business. These can be of two types :

Tangible Real accounts: These are accounts of things that can be touched, measured, sold or purchase. Examples of tangible real accounts are land account, furniture account and cash account.

Intangible Real accounts: These are accounts of things that cannot be touched in the physical sense but can be measured in terms of money value. Trademark or patent rights are examples of intangible real accounts.

Nominal Accounts

Nominal accounts are the accounts of each head of expense or income of a business. They are used to define the nature of the transactions; hence, they are also called fictitious accounts. Without nominal accounts, it is very difficult for the management to find out where the money was spent. As these accounts are used to define the nature of the transaction they are nominal accounts.

Certain rules have to be followed for the different accounts to decide which account has to be debited and which has to be credited. It is also important to understand whether the transaction has to be posted n the debit side or the credit side of an account.

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