Ans : As per the accounting equation, the broad categories of the account are:
Assets: Includes all the resources which the firm has.
Liabilities: Amounts that the firm owes to outsiders
Capital: Amounts that the firm owes to the owners and proprietor who have
invested in the firm.
Expenses: Amounts that have been spent, or even lost, in carrying on operations.
Incomes: Amounts earned by the firm.
Accounts may be classified in another manner:
Personal Account : Personal accounts relate to personal, debtors, or creditors.
Example ABC & Co., Ram Account, etc.
Real Account : Accounts which relate to assets of the firm. For example,
Machinery, Furniture, Cash, Plant, Land etc.
Nominal Account : Accounts, which related to expenses, losses, gains, revenue etc. like wages, salary, interest, commission etc. The net result of all the nominal accounts is reflected as profit or loss which is transferred to
the capital account. Nominal accounts are, therefore, temporary.
On the basis of the above, three classifications of accounts, three basic rules about
recording transactions are:
- Personal account
Debit the receiver and credit the giver
2. Real Account
Debit what comes in and credit what goes out
3. Nominal Account
Debit all expenses/losses and credit all income/gains
