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    The Golden Rules of Accounting

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    Ramesh Mani
    The document outlines the three golden rules of accounting: 1) For personal accounts, debit the receiver and credit the giver. 2) For real accounts, debit what comes in and credit what goes out. 3) For nominal accounts, debit expenses and losses and credit incomes and gains. Following these three rules allows anyone to perform basic bookkeeping by understanding the different types of accounts and applying the appropriate debit and credit based on the account type and transaction details.

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    The Golden Rules of Accounting

    Uploaded by

    Ramesh Mani
    317 views1 page
    The document outlines the three golden rules of accounting: 1) For personal accounts, debit the receiver and credit the giver. 2) For real accounts, debit what comes in and credit what goes out. 3) For nominal accounts, debit expenses and losses and credit incomes and gains. Following these three rules allows anyone to perform basic bookkeeping by understanding the different types of accounts and applying the appropriate debit and credit based on the account type and transaction details.

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    Golden Rules of Accounting

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    The document outlines the three golden rules of accounting: 1) For personal accounts, debit the receiver and credit the giver. 2) For real accounts, debit what comes in and credit what goes out. 3) For nominal accounts, debit expenses and losses and credit incomes and gains. Following these three rules allows anyone to perform basic bookkeeping by understanding the different types of accounts and applying the appropriate debit and credit based on the account type and transaction details.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    317 views1 page

    The Golden Rules of Accounting

    Uploaded by

    Ramesh Mani
    The document outlines the three golden rules of accounting: 1) For personal accounts, debit the receiver and credit the giver. 2) For real accounts, debit what comes in and credit what goes out. 3) For nominal accounts, debit expenses and losses and credit incomes and gains. Following these three rules allows anyone to perform basic bookkeeping by understanding the different types of accounts and applying the appropriate debit and credit based on the account type and transaction details.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 1

    The Golden Rules of Accounting

    1. Debit The Receiver, Credit The Giver

    This principle is used in the case of personal accounts. When a person gives something to the
    organization, it becomes an inflow and therefore the person must be credit in the books of accounts.
    The converse of this is also true, which is why the receiver needs to be debited.

    2. Debit What Comes In, Credit What Goes Out

    This principle is applied in case of real accounts. Real accounts involve machinery, land and building
    etc. They have a debit balance by default. Thus when you debit what comes in, you are adding to the
    existing account balance. This is exactly what needs to be done. Similarly when you credit what goes
    out, you are reducing the account balance when a tangible asset goes out of the organization.

    3. Debit All Expenses And Losses, Credit All Incomes And Gains

    This rule is applied when the account in question is a nominal account. The capital of the company is a
    liability. Therefore it has a default credit balance. When you credit all incomes and gains, you increase
    the capital and by debiting expenses and losses, you decrease the capital. This is exactly what needs to
    be done for the system to stay in balance.

    The golden rules of accounting allow anyone to be a bookkeeper. They only need to understand the types of
    accounts and then diligently apply the rules.

    1. PERSONA A/Cs : deal with, indivduals, forms, companies and corporations.


    2. REAL A/Cs : deal with assets which can be seen, tiuchesd or felt through and includes invisible "goodwill".
    3, NOMINAL A/Cs : deal wit expenses and losses; and incomes and gains.
    THE RULES FOR 'DEBIT' AND 'CREDIT' are :-
    Personal A/cs "debit" the receiver and "credit" the giver,
    Real a/cs .. "debit" what comes in and "credit" what goes out.
    Nominal a/cs.. "debit" expenese and losses aand "credit" incomes and gains,

    Debit entries are ones that account for the following effects:

    Increase in assets
    Increase in expense
    Decrease in liability
    Decrease in equity
    Decrease in income

    Credit entries are ones that account for the following effects:

    Decrease in assets
    Decrease in expense
    Increase in liability
    Increase in equity
    Increase in income
    Type Debit Credit
    Assets Increase Decrease
    Expense Increase Decrease
    Liability Decrease Increase
    Equity Decrease Increase
    Income Decrease Increase

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