golden rules of accounting

The Golden Rules of Accounting are a set of principles used to record financial transactions in the double-entry accounting system. These rules help determine which accounts are debited and which are credited. They are categorized based on the three types of accounts in accounting:

🔹 1. Personal Account

Rule:
Debit the receiver
Credit the giver

Explanation:
When a person or organization receives something, they are debited. When they give something, they are credited.

Example:
You pay ₹1,000 to Mr. A.
→ Debit: Mr. A’s Account (receiver)
→ Credit: Cash Account (cash going out)

🔹 2. Real Account

Rule:
Debit what comes in
Credit what goes out

Explanation:
Real accounts relate to assets and properties. When an asset comes into the business, it is debited; when it goes out, it is credited.

Example:
You buy a machine for ₹50,000.
→ Debit: Machinery Account (asset comes in)
→ Credit: Cash/Bank Account (cash goes out)

🔹 3. Nominal Account

Rule:
Debit all expenses and losses
Credit all incomes and gains

Explanation:
Nominal accounts deal with expenses, losses, incomes, and gains. Expenses and losses are debited; incomes and gains are credited.

Example:
You earn ₹10,000 in commission.
→ Debit: Cash/Bank Account (money received)
→ Credit: Commission Income Account (income)