Last Updated on 09/01/2024 by Pardeep Garg

Every economic entity is required to provide financial information to all of its stakeholders. The financial information provided must be accurate and present a true picture of the entity. It must account for all of its transactions for this presentation. Accounting must be consistent because economic entities are compared to understand their financial status.

There are three Golden Rules of Accounting that must be followed in order to achieve uniformity and correctly account for transactions. These rules serve as the foundation for entering journal entries, which in turn serve as the foundation for accounting and bookkeeping.

There are rules that make the accounting process easier. To begin, comprehend real account examples, the definition of real account, mix examples of a personal account and real account and mix examples of nominal account and real account. Second, we will look at nominal account examples, the definition of a nominal account, and a combination example of a personal account and a nominal account, as well as a combination example of a real account and a nominal account.

Third, we will learn about personal account examples, the definition of a personal account, as well as a combination example of a real account and a personal account, as well as a combination example of a nominal account and a personal account.

Accounting has credit and debit rules, which are referred to as the three golden rules of accounting. It is also known as the three types of accounts in accounting. We will look at different types of accounts, including examples of real accounts, nominal accounts, and personal accounts. Let us go over this in more detail:

Account categories

To comprehend the Golden Rules of Accounting, we must first comprehend the various types of accounts. The account classification applies to all general ledger types. In other words, each account will fall into one of the broad categories listed below. Accounts are classified into three types:

Real Account
Personal Account
Nominal Account

Real Account Definition

Real Account refers to any type of asset, whether tangible (for example, land, stock, building, etc.) or intangible (for example, goodwill, copyrights, patents, etc.).

The First Golden Rule – Keep True Accounts

What comes in is debited, and what goes out is credited.

The following are examples of accounts that reflect the physical characteristics of a situation:

The Goods / Stock Account represents stock that is physically present.

A machinery account is a physical representation of machinery.

A cash account is a bank account that holds cash that is physically present.

Real Accounts Examples

Let’s look at a few of the top 50 real-world examples to get a better understanding of the concept.

Real-World Case Study

Mr. Joe paid cash for furniture worth Rs.75,000/-

Accounts	Debit Type	Credit Type	Applied Rules
Furniture A/c	Real A/c		Debit what’s come in.
To Cash A/c		Real A/c	Credit what goes out.

One of the three types of accounts is real accounts. This is an excellent illustration of real account to real account accounting procedures. According to the first golden rule of Real Accounts, the Furniture A/c is debited and the Cash A/c is credited with Rs.75,000/-

Purchased goods from a retail store on credit for Rs.22,000/-

Accounts	Debit Type	Credit Type	Applied Rules
Purchaser A/c	Real A/c		Debit what’s come in.
To Retail Store A/c		Personal A/c	Credit the giver.

This is an excellent illustration of the real account to personal account accounting process. According to the golden rule, the Purchaser A/c is debited Rs.22,000/- and the Retail Store A/c is credited Rs.22,000/-.

The goods were sold in cash for Rs.5,000/-

Accounts	Debit Type	Credit Type	Applied Rules
Cash A/c	Real A/c		Debit what’s come in.
To Sales A/c		Real A/c	Credit what goes out.

In this case, Rs.5,000/- will be deducted from the Cash A/c and credited to the Sales A/c. This is a real-time example of a transaction between two real accounts.

I deposited Rs.7,500/- in cash into my bank account.

Accounts	Debit Type	Credit Type	Applied Rules
Bank A/c	Personal A/c		Debit the receiver.
To Cash A/c		Real A/c	Credit what goes out.

A transaction of Rs.7,500/- was made between the personal and real accounts, where the bank account was debited and the cash account was credited. I hope these real-world examples helped you understand the concept.

Definition of a Nominal Account

Nominal accounts are those that are associated with income, gains, losses, or expenses. The remaining balances of nominal accounts are then posted to the capital account at the end.

Nominal Accounts – The Second Golden Rule

Deduct all expenses and losses, and credit all income and gains.

The following accounts reflect the lack of monetary value:

Interest received account – This is a representation of income derived from interest.

Salaries account – a general ledger account that represents salary expenses.

Profit on asset sale – represents the sale of assets, which results in a gain.

The account for loss on asset sale – represents the loss on asset sale.

YOU MAY TO READ: Salary Slip

Examples of Nominal Accounts

Mr. Shah received a salary (wages) of Rs.28,000/- in cash.

Accounts	Debit Type	Credit Type	Applied Rules
Salary A/c	Nominal A/c		Debit all expenses & losses.
To Cash A/c		Real A/c	Credit what goes out.

This is the best example of nominal to real account conversion. According to the golden rule, the salary account is debited and the cash account is credited with Rs.28,000/-

Mr. Joseph is owed Rs.52,000/- in unpaid wages.

This is an excellent illustration of the nominal account to personal account accounting method. Salary A/c is debited with Rs.52,000/- and Salary Outstanding A/c is credited with Rs.52,000/-, according to the golden rule.

Personal Account Definition

Personal accounts are those that are directly or indirectly related to individuals, companies, firms, or organizations. Kumar Account, Xyz Pvt. Ltd. Account, capital account, prepaid account, bank account, drawings account, creditors account, outstanding account, debtors account, suppliers account, and so on are examples of personal accounts.

Personal Accounts are the third Golden Rule.

Deduct from the receiver and credit from the giver.

The following accounts reflect the account used for personal reasons:

Bank account – a bank account that represents a company.
Mrs. Jenny a/c – the account represents Mrs. Jenny personally.
Capital account – a type of account that represents the owner of a company, organization, or individual.
M/s Fintech & Co a/c – Is a corporation represented by a company. Fintech & Co.

Personal Account Example

I drew Rs.45,000/- from my bank account for personal use.

Accounts	Debit Type	Credit Type	Applied Rules
Drawing A/c	Personal A/c		Debit the receiver
To Cash A/c		Real A/c	Credit what goes out.

Personal accounts are one of the three types of accounts. As per the golden rule – Drawing A/c is debited with Rs.45,000/- and Cash A/c is credited with Rs.45,000/-.

Mr. Jain was paid in cash of Rs.35,000/-

Accounts	Debit Type	Credit Type	Applied Rules
Mr. Jain A/c	Personal A/c		Debit the receiver
To Cash A/c		Real A/c	Credit what goes out

This is an excellent illustration of the personal account to real account accounting procedure. According to the golden rule, Mr. Jain A/c is debited Rs.35,000/- and Cash A/c is credited Rs.35,000/-.

Mr. Pankaj began his business with a cash investment of Rs.85,750.

Accounts	Debit Type	Credit Type	Applied Rules
Cash A/c	Real A/c		Debit what’s come in.
To Capital A/c		Personal A/c	Credit the giver.

In this case, Rs.85,750/- will be deducted from the Cash A/c and credited to the Capital A/c. This is an example of a real-time transaction from a real account to a personal account.

Brokerage fees of Rs. 9,500/- were earned but not received.

Accounts	Debit Type	Credit Type	Applied Rules
Accrued Brokerage A/c	Personal A/c		Debit the receiver.
Brokerage A/c		Nominal A/c	Credit all income’s & gain’s.

In this case, a transaction was made for Rs.9,500/- between a personal account and a nominal account, where Accrued Brokerage A/c was debited and Brokerage A/c was credited. I hope these personal account examples helped you understand the concept.

Conclusion

We have learned the definitions of three types of accounts, as well as 10 examples of personal accounts, real accounts, and nominal accounts. I hope these examples of real accounts, nominal accounts, and personal accounts will help you in class 11, class 12, and later in your accounting career.