Golden rules of accounting #class11 #accounts #commercewallah

Golden rules of accounting are the rules for passing / making Journal Entries in the books of account.

Requirement for applying golden rules of accounting :-

First , recognize the type of account

Then , apply the requisite rules to pass the journal entries.

Account are classified into three different types , which are explained below :-   

PERSONAL ACCOUNT  - An account which relates to the person which may be real ( e.g. Ram ) or artificial ( Any company or Firm ).

REAL ACCOUNT - An account which relates to any assets or properties like Furniture , Building etc.  

      - Tangible real account ( e.g., Building )

      - Intangible real account  ( e.g., Goodwill , patent , Trademark )

NOMINAL ACCOUNT - An account which relates to expenses or losses and incomes or gains 

      

Rules for different accounts are :- 

PERSONAL ACCOUNT

DEBIT THE RECEIVER 

CREDIT THE GIVER 

E.g., -

Ram paid ₹10,000 to Shyam

Here , Giver or payer is Ram therefore Ram will be credited 

           Receiver is Shyam , therefore Shyam will be debited

The journal entry for the above transaction will be 

 Shyam A/c ..........Dr      ₹10,000

           To Ram A/c                    ₹10,000

(Being ₹10,000 paid by Ram to Shyam)

REAL ACCOUNT

DEBIT  WHAT COMES IN THE BUSINESS 

CREDIT WHAT GOES OUT OF THE BUSINESS 

E.g.,

Furniture purchased in cash ₹50,000

furniture will come into the business therefore Debited 

Cash will go out of the business since it is paid therefore Credited 

The journal entry for the above transaction will be 

Furniture A/c ............Dr    ₹50.000

        To Cash A/c                       ₹50,000 

NOMINAL ACCOUNT

DEBIT ALL THE EXPENSES AND LOSSES 

CREDIT ALL THE INCOMES AND GAINS 

E.g., 

Salary paid to the employees in cash ₹10,000

Here, salary is an expense for business therefore debited and cash being real account and is going out of the business therefore will be credited 

The journal entry for the above transaction will be 

Salary A/c..............Dr    ₹10,000

     To Cash A/c                       ₹10,000

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