There are 3 types of accounts
Real account − It relates assets and liabilities; it does not include people accounts. They carry forword every year.
Personal account − Connects individuals, firms and associations accounts.
Nominal account − Relates all income, expenses, losses and gains accounts.
Golden rules of accounting
If a person gives something to a firm, it must be recorded as credit in the books of accounts. It is used as in personal accounts.
Real accounts consist of machinery, land and building etc. debit what comes in means it will add to the existing balance similarly, credit what goes means it will be deducted from the existence balance.
When a firm get a profit, it will credit all incomes and gains means it will increase firm’s capital. Similarly, by debiting expenses and losses means it will decrease its capital. These are used in nominal accounts.
|Type of account||Golden rules|