Three Types of Personal Accounts
Real, Personal and Nominal accounts are the traditional classification of account types in accounting, however, personal accounts are further distinguished under three categories such as Natural, Artificial, and Representative.
Golden rule of accounting for personal accounts is – Debit the Receiver & Credit the Giver
Natural Personal Accounts
These accounts are related to human beings i.e. natural persons who are created by God. They possess a physical existence.
Examples
Sam’s A/C, Maya’s A/C, Capital A/C, Drawings A/C, Debtor’s A/C, Creditor’s A/C, etc. come under the category of natural personal accounts.
Journal entry using natural personal account – 5,00,000 cash brought in as capital.
Artificial Personal Accounts
Second among three types of personal accounts is “Artificial” personal account. These accounts do not have a physical existence however, they are recognized as persons in business dealings. Most often they are legal entities created by human beings.
Examples
Any Public or Private company A/C, Bank A/C, Club A/C, Insurance company A/C, NGO A/C, Cooperative society A/C, etc. would fall under this category.
Journal entry using both natural and artificial personal accounts – 5,00,000 brought in as capital via bank cheque.
Representative Personal Accounts
This account is different as compared to the other two types of personal accounts as it refers to accounts which represent a person or a group. (It is not directly their account but it represents & is linked to them)
Examples
Outstanding expense A/C, Prepaid expense A/C, Accrued Income A/C, Income received in advance A/C, Unearned commission A/C, etc.
Journal entry using representative personal account – 5,00,000 due to be paid for rent but not disbursed until the end of the period.
Short Quiz for Self-Evaluation
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