What are Real Accounts & Nominal Accounts

Accounts are broadly classified into two (2) category namely: Personal Accounts and Impersonal Accounts ( see earlier article).

For  Impersonal accounts, they can be sub-divided into (a) Real Accounts & (b) Nominal Accounts.

Below explain:

Real Accounts:

Related to assets or properties which are either:

  • Tangible real accounts-assets that can be touched, felt, measured, purchased and sold. Examples like land, building, furniture, stocks, cash accounts
  • Intangible real accounts-assets which have no physical existence but can be measured in monetary terms. For example, goodwill, patent rights, trade marks

Nominal Accounts:

  • Relates to all expenses, losses, incomes and gains. For examples interest received, wages, salaries, rent¬† & postage. Appear in the Income Statement. In ledgers, separate account is opened for each of the item.
  • Nominal accounts are also called temporary accounts because they are ultimately taken up into the Income Statement..

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