Keeping in view the different type of transactions in a business firm, the accounts can be classified into following three categories:-

a) Personal Accounts:- All the transactions relating to any person, company and firm, are called personal accounts. For example proprietor’s capital account, bank accounts, insurance company’s account, customers account, suppliers account etc. Some time, similar type of transactions relating to so many persons is shown in one common account. That is also called personal account. For example: salary payable to so many workers is not shown separately in individual name but a common account ‘Outstanding Salaries’ is created. In this case, Outstanding Salaries Account is called as personal account. Prepaid expenses, Income received in advance, Accrued Income etc. are also few examples of personal accounts.

b) Real Accounts:- Real accounts are kept separately for such things which can be seen, touched, felt, measured, purchased or sold etc. It includes properties, assets, goods purchased or sold etc. which can physically be transferred. But there are certain examples of real accounts also though they are not the things which can be physically touched or transferred like goodwill, patent rights and trade marks etc.

c) Nominal Accounts:- All the income and expenditures accounts are called as nominal accounts. These are the accounts which can be recognized by name only but physically, no body can touch or see them. For example: conveyance expenses, salaries, rent, interest, commission, discount, cartage etc.

Please note that in all above mentioned cases, the separate account is opened for each type of the transaction keeping in mind the nature of transaction.