Golden Rules of Accounting

Question

Accepted Answer

The Golden Rules of Accounting are fundamental principles that guide the recording of financial transactions.

The first Golden Rule is the Personal Account Rule, which states that all personal accounts are debited for the receiver and credited for the giver.
The second Golden Rule is the Real Account Rule, which states that all real accounts are debited for what comes in and credited for what goes out.
The third Golden Rule is the Nominal Account Rule, which states that all nominal accounts are debited for expenses and losses, and credited for incomes and gains.
These rules ensure that the accounting equation (Assets = Liabilities + Equity) remains balanced.
For example, when a company receives cash from a customer, the Cash account (real account) is debited (increased) and the Accounts Receivable account (personal account) is credited (decreased).

Accepted Answer

Personal account

Debit what comes in

Credit what goes out

Real account

Debit the recover

Credit the giver

Nominal account

Debit all expenses and losses

Credit all income and gaines

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