![]() For example, during the purchase and sale of goods, only two components directly get affected i.e money and stock. These components actually do not exist in any physical form but they actually exist. Transactions related to income, expense, profit and loss are recorded under this category. Hence, in the journal entry, the Loan account will be debited and the Bank account will be credited. In this transaction, cash goes out and the loan is settled. The golden rule for real accounts is: debit what comes in and credit what goes out. These accounts appear in the Balance Sheet and the balances get carried forward to the next financial year. These account balances do not come to zero at the end of the financial year unless there is a sale of the asset or payment made towards a liability or closure or acquisition of the business. Machinery, Buildings, Goodwill, Patent rights, etc. Accounts of both tangible and intangible nature fall under this category of accounts, i.e. The ledger accounts which contain transactions related to the assets or liabilities of the business are called Real accounts. Hence, in the journal entry, the Employee’s Salary account will be debited and the Cash / Bank account will be credited. In this example, the receiver is an employee and the giver will be the business. The golden rule for personal accounts is: debit the receiver and credit the giver. Some examples of personal accounts are customers, vendors, salary accounts of employees, drawings and capital accounts of owners, etc. Ledger accounts that contain transactions related to individuals or other organizations with whom your business has direct transactions are known as personal accounts. Each account type has a rule to identify its debit and credit aspect called as the Golden Rule of Accounting. According to the double entry system of bookkeeping, there are three types of accounts that help you to maintain an error-free record of your journal entries. ![]()
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