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Normally, Accounts are classified into mainly two classes viz. (1) Personal accounts and (2) Impersonal accounts. These impersonal accounts are further subdivided into (i) Real account and (ii) Nominal account. But usually three types of accounts namely Personal Accounts, Real or Property Accounts and Nominal or Fictitious Accounts are opened to keep a complete record of business transactions.


1. Personal Accounts

Personal Accounts are those which are related to persons. A separate account is prepared for each person, because the firm deals its transactions with a number of persons. Such accounts can take the following forms :

(i)                 Natural person’s accounts e.g., Kumar’s account

(ii)               Artificial persons’ or body of persons’ accounts e.g., Bank account, any company’s account

(iii)             Representative person’s accounts e.g., salaries outstanding account, prepaid expenses account. 

2. Impersonal Accounts

(i) Real Accounts or Property Accounts. Real Accounts are those accounts which can be related to a property, an asset or possession e.g., plant account, machinery account, cash account etc. Separate account is prepared for each class of assets of the organisation.

(ii) Nominal Accounts. Nominal accounts are those which are related to the business expenses or losses and incomes or gains.

For example : Wages account, discount account, commission account.