1. Personal Account -Personal account is an account of a person.

For the purpose of accounting a person is

divided into three categories viz., natural person for e.g. Mr. Aditya, Mr. Vijay, Mrs.Reena etc., artificial person
like partnership firms, companies or business organization for e.g. Reliance Industries Ltd., Cipla Ltd., Bank of
India, etc. and representative personal account for e.g. debtors account, creditors account. Capital account,
outstanding exp, prepaid expense

2.. Real account. These are the accounts of properties and assets of the business. A separate account is prepared
for each asset or property. These assets are of two types namely, tangible and intangible. Tangible assets are
those assets which can be seen, touched, measured etc. fore.g. stock, machinery, furniture, building, goods etc.
Intangible assets are those assets which can not be seen or touched but can be measured in terms of money and
recorded in the books of accounts for e.g. goodwill, copy rights, trade marks, brand name, etc.

3. Nominal account: These are the accounts of expenses, losses, gains and incomes for e.g. interest account,
discount account, commission account, salary account, wages account etc.

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Illustration 1
Classify the following accounts into personal, real and nominal.
Goods A/C, Salary A/C, State Bank of India A/C, Printing and Stationery A/C, Discount Received A/C, Capital
A/C, Vinay's A/C, Carriage inward A/C, Stock A/C, Investment A/C, Loss goods by fire A/C, Tools A/C,
Yashodhan Library A/C, Repairs to Machinery A/C, Manager Salary A/C, Copyright A/C, Patents A/C, Live
Stock A/C, Sales Tax A/C, Audit fees. A/C, Bad debts A/C, Premises A/C, Leasehold Building A/C, Freehold
Property A/C, Shreenaths Textile A/C, Stock of stationery A/C, Insurance A/C, Gas and light-A/C, Debtors
A/C, Creditors A/C, Trade expenses A/C, Royalty A/C, Goodwill A/C, Interest A/C, Railway freight A/C,
Profit sale of Machinery A/C, Loss on sale of Investment A/C.

Solutions :

Personal Accounts Real Accounts Nominal Accounts

State Bank of India A/C Goods A/C Salary A/C
Capital A/C Stock A/C Printing and stationery A/C
Vinay A/C Investment A/C Discount A/C
Outstanding Expenses A/C Tools A/C Carriage Inward A/C
Prepaid Insurance A/C Copyright A/C Loss goods by fire A/C
Loan A/C Patent A/C Repairs to machinery A/C
"Yashodhan library A/C Live stock A/C Manager's Salary A/C
Shreenath Textile A/C Premises A/C Sales Tax A/C
Debtors A/C Leasehold building A/C Audit fees A/C
Creditors A/C Freehold building A/C Bad debts A/C
Stock of stationery A/C Insurance A/C
Goodwill A/C Gas and light A/C
Trade expenses A/C
Royalty A/C
Interest A/C
Railway freight A/C
Profit on sale of Machinery A/C
Loss on sale of investment A/C

GOLDEN RULES OF ACCOUNTING

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 Personal Account
DEBIT THE RECEIVER
CREDIT THE GIVER

Real Account
DEBIT WHAT COMES IN
CREDIT WHAT GOES OUT
Nominal Account
DEBIT ALL EXPENSES AND LOSSES
CREDIT ALL GAINS AND INCOMES

CLASSIFICATION OF GOODS ACCOUNT

Goods is the commodity in which a trader or businessman is dealing. Groceries will be considered as goods
for grocery merchant whereas furniture will be considered as goods for furniture merchant. Goods
account is a real account as the stock of goods is a current asset. Though the goods is a single account,
but for the purpose of recording into the journal the goods is subdivided into five subparts as per the
transaction effect. These subparts are purchase account, sales account, purchase return account, sales return
account and stock account.
Goods- 1.Purchases
2. Sales
3.Purchase Return
4.Sales Return
5.Stock
Because of such classification of the goods account, whenever the goods is purchased purchases account
is debited instead of good account, goods sold then sales account is credited instead of goods account, for
goods returned to suppliers purchase return account is credited instead of goods account and for goods
returned by customer a sales return account is debited instead of goods account, finally goods lying unsold
with the business is termed as Stock

Illustration

Journalize the following transactions in the books of Mr. Prathamesh. January 2009

1st Started business with cash of Rs. 10000

2nd Bought furniture for Rs. 20000 in cash

3rdBought goods for Rs. 25000 in cash

10th Sold .goods for Rs. 30000 in cash

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 15 th Paid Salary to staff Rs. 5000 in cash

20th Paid rent Rs. 2000 in cash

25th Bought goods for Rs. 10000 on credit from shyam

30th Sold goods for Rs. 10000 on credit to Sunil

Illustration

On January 1, 2009 Mr. Mahadev started business in the name of M/s. Mahadev &. Sons by bringing
in cash of Rs. 50,000 of which Rs. 15,000 deposited in the Canara Bank.

During the month of January 2008 the following transactions took place -

January 3. .........A loan of Rs. 50,000 taken from the Canara Bank.

January 5...........Some materials worth Rs. 10,000 purchased from Mr. Sohanlal on credit m

January 7. .........Furniture worth Rs. 17,500 and machinery worth Rs. 30,000 purchased in
cash

January 9………… Rs. 1,000 paid towards telephone charges by cheque.

January 10.........Some office equipments bought for Rs. 4,500 from M/s. Tiger & Sons on
credit.
January 12.........Goods worth Rs. 26,500 sold in cash
January 15.........Goods worth Rs. 4,000 sold to Mr. Shiva on credit

January 16.........50 shares of Tata Steel Ltd. @ Rs. 280 per share purchased in cheque
January 18. .......Mr. Shiv returned goods worth Rs. 100 being defective.
January 20.........Rs. 3,750 received from Mr. Shiv after allowing him Rs. 150 as discount.

January 21……….. Goods worth Rs. 5,500 purchased on credit from Mr. Shyam and sold
to Ravi Traders for Rs. 6,200 on credit

January 22…….....Rs. 201 given as donation in cash

January 25. …….Rs. 5,300 paid as salaries to the staff members in cash

January 28………Rs. 2,100 received from a salesman in cash for the goods sold after
deducting his travelling expenses of Rs. 175.

You are required to pass the journal entries in the journal of M/s. Mahadev & &. Sons
Illustration 3

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The following transactions took place in the business of M/s. Nanavati & Co. during April 2009. You are
required to journalise them
April 1 ………………Mr. Nanavati started business with Rs. 1,00,000 cash and a machine of
. 25,000. Out of Rs. 1,00,000 Rs. 50,000 deposited in the State Bank of India.

April 2 …………….. Goods worth Rs. 3,300 purchased from Mr. Chimanlal. Cash paid to him Rs. 1,000.

April 4 ......................Stationery worth Rs. 250 purchased on cash.

April 5 ....................Goods sold to Padma Traders for Rs. 1,500 on credit

April 10...................Goods purchased from Mr. Soneji for Rs. 1,500 on credit
April 11 .................Half of the goods purchased from Soneji sold to Mr. Kanji on credit0 on a profit
of Rs. 125 .

April 12....................Rs. 2,150 paid to Mr. Chimanlal in full and final settlement of Rs. 2,300.

April 18....................Mr. Nanavati brought in additional capital of Rs. 25,000 in cash.

April 20………………Goods worth Rs. 3,000 sold to Mr. Raman at 10% trade and 5% cash
discount. Mr. Raman paid cash immediately.

April 22……………….Mr. Kanji is declared insolvent and only 50 paise in a rupee could be
recovered from him.
Illustration 4
Journalise the following transactions in the books of M/s. Rekha Traders
2009
November 1……..Started business with
Cash Rs. 5,00,000/-
Land Rs. 6,00,000/-

Machinery Rs. 1,50,000/-

Bank Rs 20,000/-

November2……….Paid rent to the landlord Rs. 1,450/- by cheque

November4...............Sold goods to Dinar for Rs. 6,430/- on credit

November7...............Purchased a building from Narendra for Rs. 2,00,000/-. Rs. 50,000 paid
immediately. The balance is payable in three equal annual installments.

November9...............Withdrew cash of Rs. 500/- for personal use.

November 11 ...........Dinar returned goods worth Rs. 480/-

November 15 ...........Purchased furniture on credit from Randhir for Rs. 3,900/.

November20.............Received Rs. 5,900/- from Dinar and allowed him a cash discount of
Rs. 50/-

November 22 ...........Rs. 3,800/- paid to Randhir in full settlement of Rs. 3,900/-

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November25 ............Rs. 500/- received as commission in cash

November 27. .........Rs. 3000/- incurred on advertising in cash

November 28. .........Fire insurance premium of Rs. 1,200/- paid in cheque

November30…….. Goods sold to Sudhir on Rs 5,000, 10 % Trade discount, 5 % cash discount