"Real, Personal, and Nominal Accounts: Understanding the Three Pillars of Accounting"​ - Traditional Approach

Report this article Bhumika Sharma Bhumika Sharma Publishing and Marking Coordinator Published Mar 19, 2023 + Follow Accounting is an essential aspect of managing a business, and accurate financial records are crucial for making informed decisions. One of the key components of accounting is the chart of accounts, which is used to organize a company's financial transactions into various accounts. These accounts are then categorized into three main types: real accounts, personal accounts, and nominal accounts. Real Accounts: Real accounts are also known as permanent accounts, and they are used to record the assets, liabilities, and owner's equity of a business. These accounts maintain a continuous balance over time and are not closed at the end of an accounting period. Examples of real accounts include cash, accounts receivable, inventory, land, buildings, equipment, and investments. The rules for real accounts are: Debit what comes in. Credit what goes out. For example, when a business...