Accounting basics · for students

Types of accounts: personal, real & nominal.

The very first thing you learn in bookkeeping: every account is one of three types. Get the classification right and the debit-credit decision writes itself. Here's each type in plain language, with Indian examples and a worked journal entry that balances to the rupee.

Reviewed July 2026
7 min read
CA Anil Agarwal & the TatvaBooks team

What are the types of accounts?

In the traditional (British) classification that Indian B.Com, Class 11-12 and CA-Foundation students learn first, every account in the books is one of three types: personal, real or nominal. That is the whole map. Once you can look at a name — say "Rent A/c" or "Ramesh's A/c" or "Furniture A/c" — and place it in the right box, deciding which side is debit and which is credit becomes almost automatic.

Why does this matter? Because every journal entry in double-entry bookkeeping needs a debit and a credit of equal amount. The type of account tells you which account to debit and which to credit — through its golden rule.

The three types — and the golden rule for each

Here is the classification with plain-language meaning, real Indian examples, and the golden rule that goes with each type. Learn this table and you have learned the foundation of accounting.

Type	What it covers	Examples	Golden rule
Personal account	Accounts of persons — real people, firms, companies or institutions you deal with.	Ramesh's A/c, Tata Motors Ltd A/c, State Bank of India A/c, Capital A/c, Drawings A/c, Outstanding Salary A/c	Debit the receiver, Credit the giver.
Real account	Accounts of assets and things you own — tangible or intangible.	Cash A/c, Furniture A/c, Building A/c, Machinery A/c, Stock A/c, Goodwill A/c, Patents A/c	Debit what comes in, Credit what goes out.
Nominal account	Accounts of expenses, losses, incomes and gains — they show up only in the P&L.	Salary A/c, Rent A/c, Wages A/c, Commission Received A/c, Interest A/c, Discount A/c	Debit all expenses & losses, Credit all incomes & gains.

A quick note on personal accounts — they come in three flavours, and questions love to test the last two:

Natural — a real human being: Ramesh's A/c, Sita's A/c.
Artificial — a legal person created by law: Tata Motors Ltd A/c, SBI A/c, a club or a co-operative society.
Representative — an account that represents a person: Outstanding Salary A/c (represents the employees owed), Prepaid Rent A/c (represents the landlord), Capital and Drawings (represent the owner).

Worked example — classify, then post

Ravi starts a stationery shop, Ravi Traders, in July 2026. Below are his first six transactions. For each one we first classify the accounts, then apply the golden rule, then pass the journal entry. Watch how the total debits equal the total credits — that is the double-entry system keeping us honest.

Transaction	Accounts & type	Rule applied
Ravi brings in ₹5,00,000 cash as capital	Cash A/c (Real) · Capital A/c (Personal)	Cash comes in → Dr; Owner gives → Cr the giver
Buys furniture for ₹80,000 by cash	Furniture A/c (Real) · Cash A/c (Real)	Furniture comes in → Dr; Cash goes out → Cr
Opens a current account, deposits ₹2,00,000	Bank A/c (Personal) · Cash A/c (Real)	Bank receives → Dr the receiver; Cash goes out → Cr
Buys goods on credit from Mehta & Co. ₹1,20,000	Purchases A/c (Nominal) · Mehta & Co. A/c (Personal)	Purchases is an expense → Dr; Mehta gives goods → Cr the giver
Pays shop rent ₹25,000 by cheque	Rent A/c (Nominal) · Bank A/c (Personal)	Rent is an expense → Dr; Bank gives → Cr the giver
Receives commission ₹15,000 in cash	Cash A/c (Real) · Commission Received A/c (Nominal)	Cash comes in → Dr; Commission is income → Cr

Now the journal, in proper format:

Journal in the books of Ravi Traders
Date	Particulars	Debit ₹	Credit ₹
01-Jul-2026	Cash A/c Dr To Capital A/c (Being capital introduced by owner)	5,00,000	5,00,000
03-Jul-2026	Furniture A/c Dr To Cash A/c (Being furniture bought for cash)	80,000	80,000
05-Jul-2026	Bank A/c Dr To Cash A/c (Being cash deposited into bank)	2,00,000	2,00,000
08-Jul-2026	Purchases A/c Dr To Mehta & Co. A/c (Being goods bought on credit)	1,20,000	1,20,000
12-Jul-2026	Rent A/c Dr To Bank A/c (Being shop rent paid by cheque)	25,000	25,000
15-Jul-2026	Cash A/c Dr To Commission Received A/c (Being commission received in cash)	15,000	15,000
	Total	9,40,000	9,40,000

Total debits ₹9,40,000 equal total credits ₹9,40,000 — the books balance. Notice the discipline: for every line we named the account, decided its type, and let the golden rule pick the side. That is all bookkeeping ever asks of you.

Common mistakes & student tips

Treating "Bank A/c" as real. A bank is a person (an institution) — Bank A/c is a personal account, not a real one. Only cash-in-hand is a real account.
Confusing "Purchases" with "Goods/Stock". Purchases A/c and Sales A/c are nominal (they are expense/income). The physical goods lying in your godown is Stock A/c, which is real.
Forgetting representative personal accounts. Outstanding Salary, Prepaid Insurance, Accrued Interest — these look like expenses but represent a person, so they are personal.
Mixing income with the asset it brings. "Commission Received" is nominal (income); the cash it brings in is real. Two different accounts, two different rules.
Tip — say the rule out loud. Before writing any entry, whisper: "What type is this? What's the rule?" Do that for a week and it becomes reflex, which is exactly what the exam rewards.

In TatvaBooks this happens automatically

Learning to classify accounts by hand is essential — it is how you understand what your books are doing. But once you are running a real business, you should not be reciting golden rules for every bill. In TatvaBooks, each ledger is tagged to the right group the moment you create it, so when you raise a GST invoice or record a payment, the correct debit and credit — including CGST/SGST/IGST — are posted for you. The journal, ledger and balance sheet build themselves, and they always balance. You keep the understanding; the software keeps the arithmetic.

Frequently asked questions

What are the three types of accounts in accounting?

Under the traditional (British) classification there are three types of accounts: personal accounts (persons, firms, companies — e.g. Ramesh's A/c, SBI A/c, Capital A/c), real accounts (assets and things you own — e.g. Cash A/c, Furniture A/c, Building A/c) and nominal accounts (expenses, losses, incomes and gains — e.g. Salary A/c, Rent A/c, Commission Received A/c). Each type has its own golden rule for deciding debit and credit.

What are the golden rules of accounting?

The three golden rules pair with the three account types. 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 incomes and gains. To pass any journal entry you first classify each account into one of the three types, then apply its rule.

Is a bank account a personal or a real account?

A bank account is a personal account. A bank is a legal person (an institution you deal with), so SBI A/c or HDFC Bank A/c follows the personal-account rule — debit the receiver, credit the giver. When you deposit cash into the bank, the bank receives, so Bank A/c is debited; Cash A/c (a real account) is credited because cash goes out of your till.

What type of account is capital or drawings?

Both Capital A/c and Drawings A/c are personal accounts — they represent the owner (a person). Capital is money the owner gives to the business, so under 'credit the giver' the Capital A/c is credited. Drawings is money the owner receives back, so under 'debit the receiver' the Drawings A/c is debited. This is why capital shows a credit balance and drawings a debit balance.

Traditional vs modern classification — which should I use?

The traditional classification (personal, real, nominal) is what most Indian B.Com, Class 11-12 and CA-Foundation syllabi teach and examine, so learn it first. The modern (American) approach classifies every account as Asset, Liability, Capital, Income or Expense and applies debit/credit by that group. Both give the same journal entry — they are two routes to one answer. TatvaBooks maps every ledger to the modern groups internally so your reports and GST returns come out right.

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Accounting basics

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