Please briefly explain why you feel this question should be reported.

Please briefly explain why you feel this answer should be reported.

Please briefly explain why you feel this user should be reported.

Sign InSign Up

AccountingQA

AccountingQA Logo AccountingQA Logo

AccountingQA Navigation

  • Home
  • Ask Questions
  • Write Answers
  • Explore
  • FAQs
Search
Ask A Question

Mobile menu

Close
Ask a Question
  • Home
  • Questions
    • Most Visited
    • Most Active
    • Trending
    • Recent
  • Follow
    • Categories
    • Users
    • Tags
  • Write an Answer
  • Badges & Points
  • Request New Category
  • Send a Suggestion
  • Search Your Accounting Question..

A_Team
A_Team
In: 1. Financial Accounting > Accounting Terms & Basics

Capital account is which type of account?

I mean to ask is it real, nominal, or personal and why?

CapitalType of Account
  • 2 2 Answers
  • 0 Followers
  • 0
Share
  • Facebook

    You must login to add an answer.


    Forgot Password?

    Need An Account, Sign Up Here

    2 Answers

    • Voted
    • Recent
    1. Ayushi Curious Pursuing CA
      2021-11-07T15:39:39+00:00Added an answer on November 7, 2021 at 3:39 pm
      This answer was edited.

      A capital account is a personal account as per the traditional rules of accounting.

      The real, nominal and personal account classification comes from the traditional rules of accounting. Let’s discuss each type of account and understand why the capital account is a personal account:

      • Real account generally represents assets or possessions of a business other than those which are related to any person (debtors account).

      Such accounts don’t close by the year-end and are carried forward.

      Examples are cash account, bank account, fixed accounts etc. The golden rule of accounting for real accounts is: “Debit what comes in, credit what goes out.”

      • Nominal accounts are the accounts that represent the income, expense, gain or loss of an entity.

      Examples are salaries account, purchase account, sales account etc. Such accounts are closed at the year-end to the profit and loss account.

      The golden rule of accounting for the nominal account is: “Debit all expenses and losses and credit all incomes and gains”

      • Personal accounts are the accounts that represent a person. For example, a debtors’ account represents the persons to whom a business owes money. Likewise, the creditor’s account, any personal loan account etc

      The golden rule of accounting for personal accounts is: “Debit the receiver and credit the giver”

      A capital account is therefore a personal account as it represents the money invested by the owner of a business. It is shown in the liabilities side of the balance sheet because it is an internal liability of a business; the money is to be paid back to the owner on liquidation.

      Let’s a journal entry related to capital account to understand the golden rules of accounting for personal accounts:

      Example,

      Cash A/c           Dr      Amt

      To Capital A/c            Amt

      ( Being cash introduced into the business)

      As cash comes into the business as capital and is given by the owner (who is a person), the Capital A/c is credited (credit the giver).

      Now, there are modern rules of accounting too. As per the modern rules of accounting, there are five types of accounts. One of which is the capital account.

      Capital when increased, it is credited and when decreased it is debited.

      Here are a few entries related to capital account:

      Cash A/c       Dr   Amt

      To Capital A/c       Amt (Credited as capital is increased)

      (Being cash introduced into the business)

      Capital A/c      Dr        Amt (Debited as capital is reduced)

      To Cash A/c                      Amt

      (Being cash withdrawn from business)

      Profit and loss A/c       Dr      Amt

      To Capital A/c                        Amt  (Capital is increased, so credited)

      (Being profit transferred to capital account)

      That’s it! I would conclude my answer.

      There is another answer available to this question. You can refer to that answer by clicking this URL. https://www.accountingqa.com/topic-financial-accounting/accounting-terms-and-basics/is-capital-a-real-account/

      • 0
      • Share
        Share
        • Share on Facebook
        • Share on Twitter
        • Share on LinkedIn
        • Share on WhatsApp
    2. AbhishekBatabyal Helpful Pursuing CA, BCOM (HONS)
      2021-11-07T16:06:37+00:00Added an answer on November 7, 2021 at 4:06 pm

      The correct option is option A.

      Journal is the book of original entry. It is from the journal, the postings in the ledgers are made. As it is the journal first to record the transactions, it is called the book of original entry.

      It is from the journal, the postings in the ledgers are made. Ledgers are called the books of principal book of entry.

      Option B Duplicate is wrong as there is no such thing as the book of duplicate entry in financial accounting. Journal entries are the first-hand record of business transactions. Hence, it cannot be the book of duplicate entries.

      Option C Personal is wrong. This classification of ‘personal’ is a type of account as per traditional rules of accounting, not books of accounts

      Option D Nominal is wrong. It is also a type of account as per the traditional rules of accounting.

      • 0
      • Share
        Share
        • Share on Facebook
        • Share on Twitter
        • Share on LinkedIn
        • Share on WhatsApp

    Related Questions

    • Is 'Reserve Capital' a Part of 'Unsubscribed Capital' or 'Uncalled Capital'?
    • Consignment account is which type of account?
    • What is capital work-in-progress?

    Sidebar

    Question Categories

    • 1. Financial Accounting

        • Accounting Terms & Basics
        • Bank Reconciliation Statement
        • Banks & NBFCs
        • Bills of Exchange
        • Capital & Revenue Expenses
        • Consignment & Hire Purchase
        • Consolidation
        • Contingent Liabilities & Assets
        • Departments & Branches
        • Depreciation & Amortization
        • Financial Statements
        • Goodwill
        • Insurance Accounting
        • Inventory or Stock
        • Investment Accounting
        • Journal Entries
        • Ledger & Trial Balance
        • Liquidation & Amalgamation
        • Miscellaneous
        • Not for Profit Organizations
        • Partnerships
        • Ratios
        • Shares & Debentures
        • Source Documents & Vouchers
        • Subsidiary Books
    • 2. Accounting Standards

        • AS
        • IFRS
        • IndAS
    • 3. Cost & Mgmt Accounting
    • 4. Taxes & Duties

        • GST
        • Income Tax
    • 5. Audit

        • Bank Audit
        • Internal Audit
        • Miscellaneous - Audit
        • Statutory Audit
    • 6. Software & ERPs

        • Tally
    • 7. MS-Excel
    • 8. Interview & Career
    • Top Questions
    • I need 20 journal entries with ledger and trial balance?

    • Can you show 15 transactions with their journal entries, ledger, ...

    • What is furniture purchased for office use journal entry?

    • What is the Journal Entry for Closing Stock?

    • What is loose tools account and treatment in final accounts?

    • What is the journal entry for goods purchased by cheque?

    • What is commission earned but not received journal entry?

    • What is the journal entry for interest received from bank?

    • How to show adjustment of loose tools revalued in final ...

    • Following is the Receipts and Payments Account of Bharti Club ...

    Hot Topics

    Accounting Policies Accounting Principles Balance Sheet Bank Reconciliation Statement Bill of Exchange Branch Accounting Calls in Advance Capital Capital Expenditure Companies Act Compound Entry Consignment Creditors Current Assets Debit Balance Debtors Depreciation Difference Between Dissolution of Firm Dissolution of Partnership Drawings External Users Fictitious Assets Final Accounts Financial Statements Fixed Assets Fixed Capital Fluctuating Capital Gain Impairment Installation Interest Received in Advance Internal Users Journal Entry Ledger Loose Tools Miscellaneous Expenditure Profit Rent Rent Received in Advance Reserves Revaluation Revenue Expenditure Revenue Reserve Sacrificing Ratio Subscription Subscription Received in Advance Trial Balance Type of Account Uncalled Capital
    • Home
    • Questions
      • Most Visited
      • Most Active
      • Trending
      • Recent
    • Follow
      • Categories
      • Users
      • Tags
    • Write an Answer
    • Badges & Points
    • Request New Category
    • Send a Suggestion

    Most Helping Users

    Astha

    Astha

    • 50,286 Points
    Leader
    Simerpreet

    Simerpreet

    • 72 Points
    Helpful
    AbhishekBatabyal

    AbhishekBatabyal

    • 65 Points
    Helpful

    Footer

    • About Us
    • Contact Us
    • Pricing
    • Refund
    • Forum Rules & FAQs
    • Terms and Conditions
    • Privacy Policy
    • Career

    © 2021 All Rights Reserved
    Accounting Capital.