3 Golden rules of accounting

In double entry book keeping system of accounting all the accounts can be classified either as :

a) Personal,

b) Real or 

c) Nominal

Three golden rules guide the principle of debit or credit, as per the nature ofthe account, of the impugned transaction.

These threerules are:

1.In case ofpersonal accounts:

  Debitthe receive

  Creditthe giver

2. In caseof real accounts

 Debit whatcomes in

 Creditwhat goes out

3. In caseof personal accounts nominal a/c

 Debit all expenditure and losses

 Credit all the income and gains

The beauty of the above three rules is: they complement each other. 

For example: if, in a transaction where one part involves a Real account and the other part is a personal or a nominal account still all these rules hold good. Hence in themselves they can govern any kind of accounting entry. 

As the business environment is becoming more complex, more and more complex transactions are coming into the public domain. ERP packages like SAP have brought about new paradigms into the domain of accounting with their concept of dummy accounts etc. 

However, pertinent to say, all those will still have to fall within the four-walls (or are there six?) of these three rules. 

I invite all the budding accountants to pour their doubts regarding double entries here so that we will grow as a community and also raise a more informed set of quality accountants. Hope my student friends- whether aspiring to be a CA/ CMA/ CS or already are qualified accountants- are listening :)