The three golden rules of accounting are the fundamental principles that guide the recording of transactions in the books of accounts. They are based on the double-entry system of accounting, which states that every transaction has a debit and a credit aspect.
| Type of Account | Debit | Credit | Example |
|---|---|---|---|
| Personal Account | Debit the receiver | Credit the giver | Paid rent: Debit landlord (receiver), Credit cash (giver). |
| Real Account | Debit what comes in | Credit what goes out | Purchased furniture: Debit furniture (what comes in), Credit cash. |
| Nominal Account | Debit all expenses and losses | Credit all incomes and gains | Paid wages: Debit wages (expense), Credit cash. |
These rules are basic and very important for accounting because all entries are based on the three golden rules. Therefore, every accountant should learn and always keep them in mind while preparing the accounts of a company.
Examples for Rules
Personal Account
10 separate Journal entries for Personal Accounts
1. Borrowed ₹50,000 from Mr. Raj| Particulars | Debit (₹) | Credit (₹) |
|---|---|---|
| Cash A/c | 50,000 | |
| Raj’s A/c | 50,000 | |
| (Being cash borrowed from Mr. Raj) |
2. Paid ₹5,000 to supplier Mr. Ravi
| Particulars | Debit (₹) | Credit (₹) |
|---|---|---|
| Ravi’s A/c | 5,000 | |
| Cash A/c | 5,000 | |
| (Being payment made to Mr. Ravi) |
3. Received ₹25,000 from Mr. Kumar
| Particulars | Debit (₹) | Credit (₹) |
|---|---|---|
| Cash A/c | 25,000 | |
| Kumar’s A/c | 25,000 | |
| (Being cash received from Mr. Kumar) |
4. Paid rent of ₹10,000 to landlord
| Particulars | Debit (₹) | Credit (₹) |
|---|---|---|
| Rent A/c | 10,000 | |
| Cash A/c | 10,000 | |
| (Being rent paid to the landlord) |
5. Returned ₹15,000 to Mr. Raj
| Particulars | Debit (₹) | Credit (₹) |
|---|---|---|
| Raj’s A/c | 15,000 | |
| Cash A/c | 15,000 | |
| (Being cash returned to Mr. Raj) |
6. Purchased goods on credit from Mr. Arun for ₹20,000
| Particulars | Debit (₹) | Credit (₹) |
|---|---|---|
| Purchases A/c | 20,000 | |
| Arun’s A/c | 20,000 | |
| (Being goods purchased on credit from Mr. Arun) |
7. Paid ₹7,000 to Mr. Ravi for goods purchased earlier
| Particulars | Debit (₹) | Credit (₹) |
|---|---|---|
| Ravi’s A/c | 7,000 | |
| Cash A/c | 7,000 | |
| (Being payment made to Mr. Ravi for previous purchase) |
8. Borrowed ₹1,00,000 from Mrs. Priya
| Particulars | Debit (₹) | Credit (₹) |
|---|---|---|
| Cash A/c | 1,00,000 | |
| Priya’s A/c | 1,00,000 | |
| (Being cash borrowed from Mrs. Priya) |
9. Received ₹50,000 as loan repayment from Mr. Ajay
| Particulars | Debit (₹) | Credit (₹) |
|---|---|---|
| Cash A/c | 50,000 | |
| Ajay’s A/c | 50,000 | |
| (Being loan repayment received from Mr. Ajay) |
10. Paid ₹12,000 to Mr. Rahul for services rendered
| Particulars | Debit (₹) | Credit (₹) |
|---|---|---|
| Rahul’s A/c | 12,000 | |
| Cash A/c | 12,000 | |
| (Being payment made to Mr. Rahul for services) |
Each entry aligns with Personal Account rules:
- "Debit the Receiver"
- "Credit the Giver"
Real Account
10 separate Journal entries for Real Accounts
1. Purchased machinery for ₹50,000 in cash| Particulars | Debit (₹) | Credit (₹) |
|---|---|---|
| Machinery A/c | 50,000 | |
| Cash A/c | 50,000 | |
| (Being machinery purchased for cash) |
2. Sold old furniture for ₹10,000 in cash
| Particulars | Debit (₹) | Credit (₹) |
|---|---|---|
| Cash A/c | 10,000 | |
| Furniture A/c | 10,000 | |
| (Being old furniture sold for cash) |
3. Purchased land for ₹2,00,000 via bank
| Particulars | Debit (₹) | Credit (₹) |
|---|---|---|
| Land A/c | 2,00,000 | |
| Bank A/c | 2,00,000 | |
| (Being land purchased via bank payment) |
4. Sold equipment for ₹30,000, received in cash
| Particulars | Debit (₹) | Credit (₹) |
|---|---|---|
| Cash A/c | 30,000 | |
| Equipment A/c | 30,000 | |
| (Being equipment sold for cash) |
5. Purchased building for ₹5,00,000
| Particulars | Debit (₹) | Credit (₹) |
|---|---|---|
| Building A/c | 5,00,000 | |
| Cash A/c | 5,00,000 | |
| (Being building purchased) |
6. Sold a vehicle for ₹1,00,000 in cash
| Particulars | Debit (₹) | Credit (₹) |
|---|---|---|
| Cash A/c | 1,00,000 | |
| Vehicle A/c | 1,00,000 | |
| (Being vehicle sold for cash) |
7. Bought furniture for ₹25,000 in cash
| Particulars | Debit (₹) | Credit (₹) |
|---|---|---|
| Furniture A/c | 25,000 | |
| Cash A/c | 25,000 | |
| (Being furniture purchased) |
8. Sold land for ₹3,00,000 in cash
| Particulars | Debit (₹) | Credit (₹) |
|---|---|---|
| Cash A/c | 3,00,000 | |
| Land A/c | 3,00,000 | |
| (Being land sold for cash) |
9. Purchased office equipment worth ₹40,000 on credit
| Particulars | Debit (₹) | Credit (₹) |
|---|---|---|
| Office Equipment A/c | 40,000 | |
| Supplier A/c | 40,000 | |
| (Being office equipment purchased on credit) |
10. Bought a computer for ₹60,000 in cash
| Particulars | Debit (₹) | Credit (₹) |
|---|---|---|
| Computer A/c | 60,000 | |
| Cash A/c | 60,000 | |
| (Being computer purchased for office use) |
Each entry aligns with Real Account rules:
- "Debit what comes in"
- "Credit what goes out"
Nominal Account
10 separate Journal entries for Nominal Accounts
1. Paid salaries of ₹20,000| Particulars | Debit (₹) | Credit (₹) |
|---|---|---|
| Salaries A/c | 20,000 | |
| Cash A/c | 20,000 | |
| (Being salaries paid) |
2. Received interest income of ₹5,000
| Particulars | Debit (₹) | Credit (₹) |
|---|---|---|
| Cash A/c | 5,000 | |
| Interest Income A/c | 5,000 | |
| (Being interest income received) |
3. Paid electricity bill of ₹2,000
| Particulars | Debit (₹) | Credit (₹) |
|---|---|---|
| Electricity Expenses A/c | 2,000 | |
| Cash A/c | 2,000 | |
| (Being electricity bill paid) |
4. Earned commission income of ₹8,000
| Particulars | Debit (₹) | Credit (₹) |
|---|---|---|
| Cash A/c | 8,000 | |
| Commission Income A/c | 8,000 | |
| (Being commission income earned) |
5. Paid advertisement expenses of ₹12,000
| Particulars | Debit (₹) | Credit (₹) |
|---|---|---|
| Advertisement Expenses A/c | 12,000 | |
| Cash A/c | 12,000 | |
| (Being advertisement expenses paid) |
6. Received rent income of ₹15,000
| Particulars | Debit (₹) | Credit (₹) |
|---|---|---|
| Cash A/c | 15,000 | |
| Rent Income A/c | 15,000 | |
| (Being rent income received) |
7. Paid telephone charges of ₹1,500
| Particulars | Debit (₹) | Credit (₹) |
|---|---|---|
| Telephone Charges A/c | 1,500 | |
| Cash A/c | 1,500 | |
| (Being telephone charges paid) |
8. Paid insurance premium of ₹3,000
| Particulars | Debit (₹) | Credit (₹) |
|---|---|---|
| Insurance Premium A/c | 3,000 | |
| Cash A/c | 3,000 | |
| (Being insurance premium paid) |
9. Paid wages of ₹5,000
| Particulars | Debit (₹) | Credit (₹) |
|---|---|---|
| Wages A/c | 5,000 | |
| Cash A/c | 5,000 | |
| (Being wages paid) |
10. Earned profit on the sale of goods ₹25,000
| Particulars | Debit (₹) | Credit (₹) |
|---|---|---|
| Cash A/c | 25,000 | |
| Profit on Sale A/c | 25,000 | |
| (Being profit on sale of goods recorded) |
Each entry follows Nominal Account rules:
- "Debit all expenses and losses"
- "Credit all incomes and gains"
