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09/11/2023

What is a Nominal Account?
A nominal account is a part of the general ledger that is closed at the end of every financial or accounting year. You can store all financial transactions in your nominal account for one fiscal year. At the end of a financial year, balances of nominal accounts get transferred to permanent or real accounts.

The nominal account must start at zero balance at the start of every fiscal year. The statement of different types of transactions is associated with this account, such as expenses, losses, gains and revenue.

Types of Nominal Account
Three types of nominal accounts are used while recording financial transactions of the business. Check below to get a detailed understanding of some types of nominal accounts:

Revenue Account
A revenue account stores financial transactions related to the income receipts of a company or an individual. This type of nominal account is present in the company's income statements and indicates how the entity is performing financially. Having a higher revenue indicates a good financial situation, whereas a low revenue highlights financial issues in the company.

Expense Account
This account records the day-to-day spending of a business within a financial year. This nominal account is generally present for either a quarter, month or year and at the end of that period, a new expense account is created with zero balance.

Gain and Loss Account
A gain and loss account is an important nominal account that summarises the expenses and revenues of a business during a specific fiscal year. The information derived from this account helps make significant business decisions on how to improve the company's financial standing

07/11/2023

What are real accounts?
So, what is a real account? A real account, or permanent account, is a general ledger account that does not close at the end of a period or at the end of the accounting year. Instead of closing, real accounts stay open, accumulate balances, and carry over into the next period or year. The amount in real accounts becomes beginning balances in the new accounting period.

Do not list real accounts on your business’s income statement. Report real accounts on your balance sheet as:

Assets
Liabilities
Equity
Real accounts also consist of contra assets, liability, and equity accounts.

Your real accounts reflect your company’s financial status and can change from period to period because they’re active throughout the entire year.

07/11/2023

05/11/2023

Personal Account
These accounts types are related to persons. These persons may be natural persons like Raj’s account, Rajesh’s account, Ramesh’s account, Suresh’s account, etc.

These persons can also be artificial persons like partnership firms, companies, bodies corporate, an association of persons, etc.

For example – Rajesh and Suresh trading Co., Charitable trusts, XYZ Bank Ltd, C company Ltd, etc.

There can be personal representative accounts as well.

For example – In the case of Salary, when it is payable to employees, it is known how much amount is payable to each of the employee. But collectively it is called as ‘Salary payable A/c’.

Rule for this Account
Debit the receiver.

Credit the Giver.

For Example – Goods sold to Suresh. In this transaction, Suresh is a personal account as being a natural person. His account will be debited in the entry as the receiver.