I am adding some examples to the explanations so, it will be easy for you to understand the concept.
- Personal account: These are the accounts with which a business does dealings. These accounts have pertained to a firm, an individual etc. Examples are Prepaid accounts, debtor account, XYZ Ltd account etc.
Golden rule: Debit the receiver and credit the giver
Ex: Goods worth 1000 bucks sold to Mr. Smith from Mr. John. In this transaction, Mr. Smith is the receiver of goods, he is called receiver and his account is to be debited in the books of business. Mr. John is the giver of goods, he is called giver and his account is to be credited in the books of business.
- Real account: These are the accounts of tangible and intangible assets.
Tangible: Land, building, furniture etc
Intangible: Goodwill, copyrights, patents etc
Golden rule: Debit what comes in, Credit what goes out
Ex: Goods sold in cash for 1500 bucks. In this transaction cash, an asset for business comes into the business on sales of goods, and therefore cash account is to be debited in the books of business. On the other side, goods, an asset of business goes out of the business on sale and therefore goods account is to be credited in the books of business.
- Nominal account: a Nominal account is an account that relates to business expenses, loss, income and gains. Nominal accounts don’t exist physically. Examples are purchasing a/c, sales a/c, rent a/c, salary a/c.
Golden rule: Debit all expenses and losses, Credit all incomes and gains
Ex: Obama purchased goods for 2000 bucks cash
here, Cash account and purchase account are involved where the former is a Real account and latter is a nominal account.
So, for the real account, the rule is that you have to credit what goes out. So, you need to credit the cash account and on the other hand, you will debit the purchase account.
An image might help you memorize this.
I hope you understood it well.
credit: Amarnath