Nature/Classifications of Accounts MCQs Quiz | Class 9
This quiz is for Class 9 students studying Elements of Book-Keeping & Accountancy (Code 254), focusing on Unit 3: Nature of Accounts & Rules for Debit and Credit. It covers the traditional classification of accounts into Personal, Real, and Nominal. Attempt all questions and click submit to see your score, then download the PDF of your answers.
Understanding the Nature and Classification of Accounts
In accountancy, every transaction affects at least two accounts. To record these transactions correctly, it’s essential to understand the nature of accounts and classify them properly. The traditional approach, also known as the English approach, classifies all accounts into three main categories: Personal, Real, and Nominal. This classification forms the basis for applying the “Golden Rules of Accounting” for debit and credit.
1. Personal Accounts
These accounts are related to persons, which can include individuals, firms, companies, associations, or any other legal entity. The rule for personal accounts is: Debit the receiver, Credit the giver.
- Natural Personal Accounts: These accounts relate to human beings. For example, Ram’s Account, Sita’s Account, Proprietor’s Capital Account, Drawings Account.
- Artificial Personal Accounts: These accounts relate to entities created by law, such as companies, firms, or institutions. For example, HDFC Bank Ltd., Reliance Industries Ltd., a local club’s account.
- Representative Personal Accounts: These accounts represent a certain person or a group of persons. Common examples include Outstanding Salaries Account (representing employees to whom salary is due), Prepaid Rent Account (representing the landlord to whom rent has been paid in advance).
2. Real Accounts
These accounts are related to all the assets and properties of the business, both tangible and intangible. The rule for real accounts is: Debit what comes in, Credit what goes out.
- Tangible Real Accounts: These accounts represent assets that have a physical existence and can be touched. For example, Cash Account, Building Account, Machinery Account, Furniture Account.
- Intangible Real Accounts: These accounts represent assets that do not have a physical existence but have a monetary value and can be bought or sold. For example, Goodwill Account, Patents Account, Trademarks Account, Copyrights Account.
3. Nominal Accounts
These accounts are related to all expenses, losses, incomes, and gains of the business. They are temporary in nature and are closed at the end of the accounting year by transferring their balances to the Trading and Profit & Loss Account. The rule for nominal accounts is: Debit all expenses and losses, Credit all incomes and gains.
- Examples of Expenses/Losses: Salaries Paid, Rent Paid, Wages, Loss by fire.
- Examples of Incomes/Gains: Commission Received, Interest Received, Sales, Discount Received.
Summary of Account Classifications
| Account Type | Represents | Example | Golden Rule |
|---|---|---|---|
| Personal | Persons (Individuals, Firms) | Capital, Bank, Debtors | Debit the receiver, Credit the giver |
| Real | Assets & Properties | Cash, Building, Goodwill | Debit what comes in, Credit what goes out |
| Nominal | Expenses, Incomes, Gains, Losses | Salaries, Sales, Rent | Debit all expenses & losses, Credit all incomes & gains |
Quick Revision Points
- There are three types of accounts: Personal, Real, and Nominal.
- Personal accounts deal with persons and legal entities.
- Real accounts deal with assets and properties.
- Nominal accounts deal with incomes, expenses, gains, and losses.
- Capital and Drawings accounts are Personal accounts.
- Cash, Furniture, and Buildings are Real accounts.
- Salaries, Rent, and Commission are Nominal accounts.
Practice Questions
- Classify ‘Machinery Account’. (Answer: Real Account – Tangible)
- What is the golden rule for Personal Accounts? (Answer: Debit the receiver, Credit the giver.)
- Is ‘Goodwill’ a Tangible or Intangible Real Account? (Answer: Intangible Real Account)
- Classify ‘Outstanding Rent Account’. (Answer: Representative Personal Account)
- What type of account is ‘Sales Account’? (Answer: Nominal Account)
