The double entry system of bookkeeping has led to the foundation of the debit and credit card system. Though it is useful, using both at the same time is quite difficult in reality. In order to understand the debit and credit card usage, the company may not spend money. Hence, the golden rules
have been devised. It helps people to understand the norms clearly without anyone’s help.
The golden rules convert the complex bookkeeping scenario into a set of principles that lead to easy application.Ascertaining the account type
The account types namely, real, nominal, and personal
accounts have its rule to account the transactions. The enlisted rules are the golden rules of the accounting realm.Debit the receiver, credit the giver
It is the case of personal accounts
. If a person gives something to the organization, it comes under credit in the range of accounts. On the contrary, the receiver needs to be debited.Debit what comes in, credit what goes out
It is the case of real accounts
that involves machinery, land, and building, etc. by default, their debit balance will be present. Thus, when a person debits, the person is adding to the existing account balance. The same way, when the credit goes out, you are reducing the account balance thereby when a tangible asset goes out.Debit all expenses and losses, credit all incomes and gains
It is the case of nominal accounts
. In nominal accounts, the company’s capital is a liability. Hence, it goes under credit balance by default. When you credit all incomes and gains, the capital is increased. On the contrary, when your credit goes down, the capital goes down. This is what exactly has to be done in order to stay balanced.
The above-elaborated pieces of types are the golden rules of accounting which allow anyone to be a bookkeeper.Tap here to know more about Tally software, Mazenet Technologies
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