Book-Keeping and Accountancy · Ch 3 — Journal
Rules of Journalising — Traditional Classification of Accounts
Rules of Journalising — Traditional Classification of Accounts
Before an amount can be entered on the debit or credit side of a journal entry, every account touched by a transaction must first be classified into one of three traditional categories. Each category carries its own golden rule of debit and credit.
Personal Account
An account relating to a person, firm, company or institution — e.g. Suresh's A/c, Bank of India A/c, Reliance Ltd A/c, Capital A/c and Drawings A/c (both treated as personal accounts of the proprietor).
Rule: Debit the receiver, Credit the giver.
Real Account
An account relating to a tangible or intangible asset owned by the business — e.g. Cash A/c, Furniture A/c, Machinery A/c, Building A/c, Goodwill A/c.
Rule: Debit what comes in, Credit what goes out.
Nominal Account
An account relating to an expense, loss, income or gain of the business — e.g. Rent A/c, Wages A/c, Salaries A/c, Commission Received A/c, Interest Received A/c, Loss by Fire A/c.
Rule: Debit all expenses and losses, Credit all incomes and gains.
| Type of Account | Examples | Rule of Debit and Credit |
|---|---|---|
| Personal | Suresh, Mahesh, Bank, Capital, Drawings | Debit the receiver, Credit the giver |
| Real | Cash, Furniture, Machinery, Stock, Goodwill | Debit what comes in, Credit what goes out |
| Nominal | Rent, Wages, Salary, Commission Received, Interest Paid, Loss by Fire | Debit all expenses/losses, Credit all incomes/gains |
An account relating to a person, firm, company or institution. Rule: Debit the receiver, C …
An account relating to a tangible or intangible asset. Rule: Debit what comes in, Credi …
An account relating to an expense, loss, income or gain. Rule: Debit all expenses and losses, Credit all …