Types of Account

Types of Accounts

Whenever any transaction takes place an accounts is either debited or credited. The three rules for recording transactions which are as follows.

Three types of Rules for Recording Transactions.

1. Personal Account

2. Real Account

3. Nominal Account

Personal Account: 

• Debit the Receiver

• Credit the Giver

Let us understand the means of example Suppose Ajay buys goods from Sachin. Here... 

1. Ajay has received the goods

2. Sachin has given the goods.

3. Ajay has to pay the price of goods

4. Sachin is entitled for a credit

5. Ajay is entitled for a debit

In accounting, Ajay will be Debited & Sachin will be Credited.

Later on when Ajay pays to Sachin, then Sachin's account will have be debited & Ajay's account has to be credited.

Real Account:

• Debit what comes in

• Credit what goes out

Suppose you buy furniture for your shop on cash. Then according to above rule furniture account will be debited (as furniture comes in) and cash account will be credited (as cash goes out.)

Nominal Account:

• Debit all Expenses / Losses

• Credit all Income / Gains

Suppose you hired a shop on rent then accounting as above rule, you will have to debit the Rent A/c & credit the Cash A/c.....

After accounts are prepared the net results of debits and credits of each account are assessed. If the total of debits are more, the balances is known as Debit Balance and if the total of credits are more, the balances is known as Credit Balance.

Other Account Types:

There are many types of accounts, each with their own set of rules and regulations. Below are some of the main types of accounts and their rules:

1. Checking Accounts: Checking accounts are used for everyday transactions, such as paying bills and making purchases. They typically have low or no interest rates, but may have fees associated with them. The rules for checking accounts vary by bank, but some common rules include a minimum balance requirement, overdraft fees, and transaction limits.

2. Savings Accounts: Savings accounts are used for long-term savings and typically offer higher interest rates than checking accounts. The rules for savings accounts typically include a minimum balance requirement, limits on withdrawals, and penalties for early withdrawals.

3. Credit Card Accounts: Credit card accounts are used to make purchases on credit. The rules for credit card accounts include a credit limit, interest rates, fees for late payments or cash advances, and rewards programs.

4. Investment Accounts: Investment accounts are used to invest in stocks, bonds, and other securities. The rules for investment accounts include fees for trading, minimum account balances, and regulations around the types of investments that can be made.

5. Retirement Accounts: Retirement accounts are used to save for retirement and typically offer tax benefits. The rules for retirement accounts include contribution limits, withdrawal rules, and penalties for early withdrawals.

6. Trust Accounts: Trust accounts are used to manage assets on behalf of a beneficiary. The rules for trust accounts include restrictions on how the assets can be used and distributed, as well as tax implications for the beneficiary.

7. Joint Accounts: Joint accounts are used by two or more individuals, such as spouses or business partners. The rules for joint accounts include rules around account ownership, joint liability for debts, and restrictions on who can withdraw funds.

8. Custodial Accounts: Custodial accounts are used to manage assets on behalf of a minor. The rules for custodial accounts include restrictions on how the assets can be used and distributed, as well as tax implications for the minor.

It's important to note that the rules for each type of account can vary by bank or financial institution, so it's always a good idea to read the account terms and conditions carefully before opening an account.