Skip to content

COMMERCEIETS

STUDY TO ENLIGHTEN YOURSELF

  • BCOM GNDU NOTES – SCORE BEST IN YOUR EXAMS!!!
  • MANAGEMENT ACCOUNTING NOTES
  • BUSINESS ORGANISATION
  • DIRECT TAX LAWS
  • INTERNATIONAL BUSINESS
  • INDUSTRIAL AND LABOUR LAWS
  • OPERATIONS RESEARCH
  • RISK MANAGEMENT AND INSURANCE
  • BUSINESS STATISTICS
  • PARTNERSHIP ACCOUNTS
  • CORPORATE ACCOUNTING
  • COMMERCIAL LAW
  • MANAGERIAL ECONOMICS
  • BUSINESS MANAGEMENT
  • 11 ACCOUNTANCY
  • GOODS AND SERVICE TAX
  • MICRO ECONOMICS
  • 12 ACCOUNTANCY
  • KEY DIFFERENCES
  • COST ACCOUNTING
  • FINANCIAL ACCOUNTING
  • FINANCIAL MANAGEMENT
  • CONSUMER BEHAVIOR
  • PARTNERSHIP ACCOUNTS
  • FINANCIAL MARKET OPERATIONS
  • CORPORATE OR COMPANY LAW
  • LANGUAGE ACROSS CURRICULUM
  • INSURANCE SERVICE MANAGEMENT
  • Toggle search form

GOLDEN RULES OF ACCOUNTING

Posted on July 30, 2019 By commerceiets No Comments on GOLDEN RULES OF ACCOUNTING

Golden rules of Accounting

The golden rules of Accounting are the foundation or base of the accounting which helps in posting the transactions correctly in the books of accounts. The golden rules of accounting are as follows:

GOLDEN RULES OF ACCOUNTING
GOLDEN RULES OF ACCOUNTING

TRADITIONAL APPROACH

Under the traditional approach, the accounts are divided into three parts. The golden rules of accounting are as follows:

PERSONAL ACCOUNT

These accounts are related to the individuals, firms, societies, clubs, hospitals etc. The personal accounts can be:

  • Natural Personal Accounts
  • Artificial Personal Accounts
  • Representative Personal Accounts  

The rule for personal account is:

DEBIT THE RECEIVER

CREDIT THE GIVER

According to the rule of ‘Debit the Receiver’, the personal account of a person to whom we give some money or goods is debited.

Example: If we gave ₹20,000 to Gopal, the entry will be:

Gopal A/c                            Dr.                          20,000

                To Cash A/c                                                        20,000

(Being cash paid to Gopal)          

In the same way, according to the rule ‘Credit the giver’, the personal account of the person from whom we receive some money or goods is credited.

Example: If we received ₹50,000 from Govind, the entry will be:

Cash A/c                              Dr.                          50,000

                To Govind                                                           50,000

(Cash received from Govind)

REAL ACCOUNT

Real Accounts are the accounts related to the assets and liabilities of the business. There may be tangible Real Accounts or Intangible Real Accounts. The rule for Real Accounts is as follows:

DEBIT WHAT COMES IN

CREDIT WHAT GOES OUT

According to the rule of ‘Debit what comes in and credit what goes out’, the account of the cash or other property which is received by the business firm is debited and in the same way, the account of the Cash or other property which goes out of the business is credited.

Example: Machinery purchased for ₹50,000

Machinery A/c                  Dr.          50,000

                To Cash A/c                                        50,000

(Machinery purchased for cash)

NOMINAL ACCOUNT

These accounts related to the expenses, incomes, profits and losses of the business. These accounts are Wages Account, Loss of goods by fire Account, Interest Received Account, Repairs Account, etc. the rule for Nominal Accounts is as follows:

DEBIT ALL EXPENSES AND LOSSES

CREDIT ALL INCOMES AND GAINS

According to the rule of ‘Debit all Expenses’, the accounts of all expenses and losses are debited.

Example: Salary paid ₹20,000

Salary A/c                            Dr.          20,000

                To Cash A/c                                        20,000

(Salary paid in cash)

Similarly, according to the rule of ‘Credit all Incomes’, the accounts of all the incomes and profits are credited.

Example: ₹5,000 is received for commission. The entry will be:

Cash A/c                              Dr.          5,000

                To Commission A/c                         5,000

(Commission received)

TRADITIONAL RULES OF ACCOUNTING
GOLDEN RULES OF ACCOUNTING

MODERN APPROACH

Under this system, the accounts are divided into 5 categories which are as follows:

ASSET ACCOUNT

An asset is any owned physical object or right, having a money value. These are the economic resources which are owned by a business and from which future economic benefits are expected to flow to the enterprise. The rule for asset account is as follows:

DEBIT THE INCREASE

CREDIT THE DECREASE

Example: Cash A/c, Furniture A/c, etc.

CAPITAL ACCOUNT

The amount invested by the owner in the business is known as Capital Account. It may be invested in cash or kind. The rule for this account is as follows:

DEBIT THE DECREASE

CREDIT THE INCREASE

LIABILITIES ACCOUNT

It refers to an amount owing by one person to another payable in money, goods or services. The rule for Liabilities Account is:

DEBIT THE DECREASE

CREDIT THE INCREASE

Example: Bank overdraft A/c, Loan A/c, etc.

EXPENSE ACCOUNT

Expense is that portion of the expenditure which has been consumed during the current accounting period to earn revenue. Since expenses are the cost of goods and services used up, they are also called expired cost. The rule for Expense Account is as follows:

DEBIT THE INCREASE

CREDIT THE DECREASE

Example: Rent A/c, Insurance A/c, Advertisement A/c, etc.

INCOME ACCOUNT

Income is the increase in the net worth of the enterprise from business or non- business activities. It is wider term which includes profits also. The rule for Income Account is:

DEBIT THE DECREASE

CREDIT THE INCREASE

Example: Interest received Account, Commission Received Account, Dividend Received A/c.

MODERN RULES FOR ACCOUNTING
GOLDEN RULES OF ACCOUNTING
Also StudyAlso StudyAlso StudyAlso Study
AccountingNon profit organisationDepreciationLiquidity ratios
Nature of AccountingReceipts and Payments AccountDepreciation AccountingAcid Test Ratio
Benefits of AccountingScope of accountingHire Purchase AccountingCash Ratio
Difference between cost accounting and financial accountingFinancial accounting, cost accounting and management accountingDifference between hire purchase and instalment systemFinancial ratio analysis
Difference between transaction and eventTransactionsUsers of AccountingRatio analysis
Limitation of AccountingCapital ExpenditureInstalment SystemDifference between consignment and sale
Book KeepingRevenue ExpenditureReserves AccountingAbnormal loss vs normal loss in consignment
AccountancyDifference between capital and revenue expenditureProvisions Treatment of loss on consignment
Accounting as science or an artAccounting EquationSingle entry systemAccounting treatment of consignment
Book Keeping vs accountingDeferred Revenue ExpenditureDifference between statement of affairs and balance sheetJoint venture vs consignment
Book keeping vs accountancyCapital receiptIFRSDepartmental Accounting
Accounting vs accountancyRevenue receiptBalance SheetMethods of departmental accounting
Basis of AccountingDifference between capital and revenue receiptProfit and loss AccountAllocation of expenses in departmental accounting
Branches of accountingDifference between accounting concepts and conventionsTrading AccountInter-departmental transfers
Cash and mercantile system of accountingAccounting StandardsVoyage AccountDifferent types of branches
Accounting PrinciplesObjectives of AccountingAccounting for Incomplete VoyageDepartmental vs Branch accounting
Golden ru les of accountingProcess of AccountingJoint ventureMethods of branch accounting
Double entry system of book keepingScope of AccountingJoint Venture Vs PartnershipIncorporation of branch trial balance
Double entry vs Single entry systemAccounting Concepts vs Accounting conventionsMethods of recording transactions in Joint VentureGarner VS Murray Rule
History of AccountingDifference between provisions and reservesConsignmentGOLDEN RULES OF ACCOUNTING
GOLDEN RULES OF ACCOUNTING
CONNECT ON LINKEDIN

DESCRIPTION : Golden rules of accounting

11 ACCOUNTANCY, FINANCIAL ACCOUNTING Tags:ACCOUNTING

Post navigation

Previous Post: WHAT IS COMPANY
Next Post: ELASTICITY OF DEMAND

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Copyright © 2025 COMMERCEIETS.

Powered by PressBook WordPress theme