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3 Golden Rules of Accounting

Updated: Jan 1

3 Golden Rules is the first thing that you learn in the Commerce field. As a Commerce student, it is a necessity to remember these 3 Golden Rules. This Rule helps you throughout your career and makes it easy to record each transaction. So, let's begin with 3 Golden Rules of Accounting.


These Golden Rules are classified into three types.

  • Personal   

  • Real 

  • Normal

Now you may wonder what these three types mean? Isn't it?

Let's go through these types.



Golden Rule of Accounting


Personal A/C:

Personal a/c are accounts of persons. These persons may be natural persons, artificial person, or representative persons


Natural persons: Raj A/C, Surjit A/C, Kapil A/C, Shubham A/c, etc.


Artificial persons:  A person in the eye of the law, such as partnership firms, companies, corporate bodies, an association of persons, etc. is known as an Artificial Person.


Representative Persons: A person who represents you in the front of other person is known as Representative Persons.


Golden Rule for this A/C


" Debit the receiver

Credit the giver "

.

Real A/C:

A Real A/C is related to Assets and Liabilities other than a person. It may be tangible or intangible. For example, Machiner is tangible Assets where Royalty is Intangible Assets.


These accounts never close at year-end and carried forward. For example, the value of Machinery is carried in the next financial year unless you have sold to another person.


Golden Rule for this A/C


" Debit what comes in

Credit what goes out "


Normal A/C:

These accounts record all the expenses, loss, profit, and gain. For example, Interest A/C.


Golden Rule for this A/C

" Debit all expenses and losses

Credit all income and gains "




Few Example:


1) salary paid ₹100

Salary A/C               Dr       To Cash A/C Here Salary is your expense that’s why it is on debit side and cash goes out that’s why it is on credit side


2) Goods sold worth ₹500 Cash A/C                 Dr     To Sale A/C Here Sale is your Profit that’s why it is on credit side and cash comes in that’s why it is on debit side


3) Purchase goods worth ₹600 Purchase A/C        Dr       To Cash A/C Here Purchase is your expense that’s why it is on  Debit side and Cash goes out that’s why it is on credit side


4) Receive interest ₹100 from bank Cash A/C          Dr         To Bank A/C Here Cash comes in that’s why it is on debit side and Bank is the giver that’s why is on credit side


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