Book-Keeping and Accountancy · Ch 2 — Meaning and Fundamentals of Double Entry Book-Keeping
Golden Rules of Debit and Credit (Traditional Approach)
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Golden Rules of Debit and Credit (Traditional Approach)
Once an account has been classified as Personal, Real, or Nominal, the following three rules — universally known as the Golden Rules of Accounting — decide whether that account is to be debited or credited in a given transaction.
| Type of Account | Rule | Debit | Credit |
|---|---|---|---|
| Personal Account | Debit the receiver, Credit the giver | The person who RECEIVES a benefit | The person who GIVES a benefit |
| Real Account | Debit what comes in, Credit what goes out | The asset that COMES IN to the business | The asset that GOES OUT of the business |
| Nominal Account | Debit all expenses and losses, Credit all incomes and gains | Every EXPENSE or LOSS | Every INCOME or GAIN |
Applying the rules — one example per rule
- Personal Account rule: Cash paid to Suresh ₹5,000 → Suresh's A/c is a Personal Account; Suresh RECEIVES the cash → Debit Suresh's A/c. (Cash A/c, a Real Account, is credited under the Real Account rule, since cash goes out.)
- Real Account rule: Furniture purchased for cash ₹10,000 → Furniture A/c is a Real Account; furniture COMES IN → Debit Furniture A/c. (Cash A/c is credited, since cash goes out.) …