Question

Objective type Questions
Classify the following accounts under the types of personal, Real and Nominal account.

1) Life insurance premium A/c
2) Mr. Kulkarnis’s Capital A/c
3) Goods A/c
4) Freight A/c
5) Wages A/c
6) Goodwill A/c
7) Copyright A/c
8) Outstanding income A/c
9) Bank charges A/c
10) Outstanding expenses A/c
11) Sundry income A/c
12) Income receivable A/c
13) Export duty A/c
14) Furniture A/c
15) Import duty A/c
16) Free sample distribution A/c
17) Sundry expenses A/c
18) Discount A/c
19) Drawings A/c
20) Fixed deposit A/c
21) Profit on sale of furniture A/c
22) Office equipment A/c
23) Bank of India A/c
24) Machinery A/c
25) Carriage Outward A/c
26) Loss on sale of machinery A/c
27) Loan A/c
28) Deposits with MSEB
29) Loss by fine A/c
30) Legal expenses A/c

Answer 1

The above mentioned accounts can be classified into the following types of accounts:

• Personal

Name of the account	Description
1) Life Insurance Premium A/c	It is classified as a personal account, since the insurance premium paid represents the amount paid for an individual.
2) Mr. Kulkarni’s Capital A/c	It is the account of a natural person, i.e. an account of a person who is alive. Hence, it can be classified as a personal account.
8) Outstanding Income A/c	It is a representative personal account as it represents the outstanding income from several persons/sources. Hence, it can be classified as a personal account.
10) Outstanding Expenses A/c	It is the representative personal account because it represents the outstanding expenses to a group of people. Hence, it can be classified as a personal account.
12) Income Receivable A/c	It is the representative personal account, i.e. it represents the income to be received from a group of persons. Hence, it can be classified as a personal account.
19) Drawings A/c	It is related to the account of an individual, i.e. proprietor’s account which shows the amount withdrawn by the proprietor from the business for his/her personal use. Hence, it can be classified as a personal account.
23) Bank of India A/c	This account is a personal account as it is related to a banking firm which is an artificial person. All those accounts which are related to a person, whether artificial or natural, are termed as personal accounts.
27) Loan A/c	Loan Account is a representative personal account, as it represents the person from whom the loan is obtained or to whom the loan is given. Hence, it is classified as a personal account.

• Real Accounts:

Name of the account	Description
3) Goods A/c	It is classified as a real account as goods are the tangible assets of a business whose value can be measured in terms of money.
6) Goodwill A/c	It is an intangible asset as it cannot be touched but its value can be measured in terms of money. Hence, it is classified as a real account.
7) Copyright A/c	It is an intangible asset as it cannot be touched but its value can be measured in terms of money. Hence, it is classified as a real account.
14) Furniture	It is the tangible asset of a business whose value can be measured in terms of money. Hence, it is classified as a real account.
20) Fixed Deposit A/c	It is an asset of a business. Hence, it is classified as a real account.
22) Office Equipment A/c	It is the account whose value can be measured in terms of money and treated as an asset of the business. Hence, it is classified as a real account.
24) Machinery A/c	It is the real tangible asset of a business and the value of this asset can be measured in terms of money. Hence, it is classified as a real account.
28) Deposits with MSEB	It is the asset of the business and hence, it is classified as a real account.

• Nominal Account:

Name of the account	Description
4) Freight A/c	It is a direct expense of a business and hence, it is classified as a nominal account.
5) Wages A/c	It is a direct expense of a business and hence, it is classified as a nominal account.
9) Bank Charges A/c	It is an indirect expense of a business. All the expenses whether direct or indirect are classified as nominal accounts.
11) Sundry Income A/c	It represents the income of a business and, thus, it is classified as a nominal account.
13) Export Duty A/c	Export duty is an indirect expense and hence, it is classified as a nominal account.
15) Import Duty A/c	It is a direct expense of a business and hence, it is classified as a nominal account.
16) Free Sample Distribution A/c	It is an indirect expense of a business and thus, it is classified as a nominal account.
17) Sundry Expenses A/c	These are the miscellaneous expenses of a business and hence, they are classified as nominal accounts.
18) Discount A/c	It can be the indirect income (if received) or indirect expenses (if paid) of a business and hence, they are classified as nominal accounts.
21) Profit on Sale of Furniture A/c	It is the indirect income or gain for a business since profit is earned on the sale of furniture and hence, it is classified as a nominal account.
25) Carriage Outward A/c	It is an indirect expense of a business and hence, it is classified as a nominal account.
26) Loss on Sale of Machinery A/c	It is a loss for a business. Hence, it is classified as a nominal account.
29) Loss by Fire A/c	It is a loss for a business. Hence, it is classified as a nominal account.
30) Legal Expenses A/c	These are the indirect expenses of a business and hence, they are classified as nominal accounts.

Note: Sundry Income Account has been wrongly categorised into Real Account as per the answer given in the textbook. But it is a Nominal Account indeed. This is because Sundry Income A/c consists of all the miscellaneous incomes of a business and, as we know all incomes and expenses are classified as nominal accounts, so Sundry Income A/c cannot be a Real Account. Hence, the answer as per the book is incorrect.