Types of accounts:
Accounts can be broadly classified under either one of the following three heads:
1. Real
2. Personal
3. Nominal
Real accounts are your tangible and intangible assets like machinery, land, furniture, cash, etc.
Personal accounts are all assets and liabilities which represent some "person" like debtors, creditors, banks, owners, etc.
Nominal accounts are accounts of your incomes and expenses.
The three golden rules:
Let us have a look at the three rules. Each of these rules applies to one of the aforesaid type of account.
For Real: Debit was comes in, credit what goes out.
For Personal: Debit the receiver, credit the giver.
For Nominal: Debit all expenses and losses, credit all incomes and gains.
Accounts can be broadly classified under either one of the following three heads:
1. Real
2. Personal
3. Nominal
Real accounts are your tangible and intangible assets like machinery, land, furniture, cash, etc.
Personal accounts are all assets and liabilities which represent some "person" like debtors, creditors, banks, owners, etc.
Nominal accounts are accounts of your incomes and expenses.
The three golden rules:
Let us have a look at the three rules. Each of these rules applies to one of the aforesaid type of account.
For Real: Debit was comes in, credit what goes out.
For Personal: Debit the receiver, credit the giver.
For Nominal: Debit all expenses and losses, credit all incomes and gains.
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