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Lesson 9 of 48 – Golden Rules of Accounting
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📘 Golden Rules of Accounting

The Golden Rules of Accounting are the foundation of every accounting system. These rules help us decide which account should be Debited (Dr.) and which account should be Credited (Cr.) while recording transactions.

Lesson Objective: Understand the three Golden Rules of Accounting and apply them correctly in business transactions.
1. What are the Golden Rules?

Every financial transaction follows one of the three Golden Rules based on the type of account involved.

Account Type Golden Rule
Personal Account Debit the Receiver, Credit the Giver
Real Account Debit What Comes In, Credit What Goes Out
Nominal Account Debit All Expenses & Losses, Credit All Incomes & Gains
These three rules are used in every accounting software, including Tally Prime.
2. Personal Account Rule
Golden Rule

Debit the Receiver
Credit the Giver

A Personal Account relates to a person, company, customer, supplier or bank.

Examples:
  • Ram A/c
  • Shyam A/c
  • SBI Bank
  • ABC Traders
3. Personal Account Example

Ram gives ₹10,000 to the business.

Account Effect
Cash A/c Debit ₹10,000
Ram A/c Credit ₹10,000
Ram is the giver, so his account is credited.
4. Real Account Rule
Golden Rule

Debit What Comes In
Credit What Goes Out

Real Accounts relate to assets and properties owned by the business.

Examples
Cash
Furniture
Building
Machinery
Computer
5. Real Account Example

Purchased Furniture for Cash ₹20,000.

Account Effect
Furniture A/c Debit ₹20,000
Cash A/c Credit ₹20,000
Furniture comes into the business (Debit). Cash goes out of the business (Credit).
6. Nominal Account Rule
Golden Rule

Debit All Expenses & Losses
Credit All Incomes & Gains

Nominal Accounts relate to expenses, losses, income, gains, discounts, commission, rent, salary, electricity bills, interest, etc.

Expense Accounts Income Accounts
Salary Commission Received
Rent Interest Received
Electricity Bill Discount Received
Printing Expense Sales
Advertisement Rent Received
Remember: Expenses increase → Debit Income increases → Credit
7. Nominal Account Examples
Example 1

Paid Office Rent ₹5,000 in Cash.

Account Entry
Rent A/c Debit ₹5,000
Cash A/c Credit ₹5,000
Example 2

Received Commission ₹2,000 in Cash.

Account Entry
Cash A/c Debit ₹2,000
Commission Received A/c Credit ₹2,000
Expenses are Debited. Income is Credited.
8. How to Identify the Account Type

Before applying any Golden Rule, first identify the account type.

Account Type
Ram Personal
SBI Bank Personal
Cash Real
Furniture Real
Salary Nominal
Rent Nominal
Sales Nominal
Commission Nominal
Always identify the account type first, then apply the appropriate Golden Rule.
9. Easy Tricks to Remember the Golden Rules
Account Type Memory Trick
Personal Receiver → Debit
Giver → Credit
Real Comes In → Debit
Goes Out → Credit
Nominal Expense → Debit
Income → Credit
Shortcut Formula
  • 👤 Person → Receiver/Giver
  • 📦 Asset → Comes In/Goes Out
  • 💰 Income & Expense → Expense Debit / Income Credit
10. Practice Transactions
Transaction Debit Credit
Purchased Furniture for Cash ₹10,000 Furniture Cash
Paid Salary ₹8,000 Salary Cash
Received Cash from Ram ₹5,000 Cash Ram
Received Commission ₹2,000 Cash Commission
Paid Electricity Bill ₹1,500 Electricity Expense Cash
Purchased Computer by Cheque ₹40,000 Computer Bank
Practice these entries regularly. Once you understand the Golden Rules, recording transactions in Tally Prime becomes much easier.
11. Practical Business Transactions

Let's apply the Golden Rules to real business transactions.

Transaction Debit Credit Rule Applied
Started Business with Cash ₹2,00,000 Cash A/c Capital A/c Real + Personal
Purchased Furniture ₹30,000 by Cash Furniture A/c Cash A/c Real
Purchased Goods on Credit from Ram ₹25,000 Purchase A/c Ram A/c Nominal + Personal
Paid Salary ₹12,000 Salary A/c Cash A/c Nominal + Real
Received Commission ₹3,000 Cash A/c Commission Received A/c Real + Nominal
Paid Electricity Bill ₹2,500 Electricity Expense A/c Cash A/c Nominal + Real
Received Cash from Mohan ₹8,000 Cash A/c Mohan A/c Real + Personal
Purchased Computer by Cheque ₹40,000 Computer A/c Bank A/c Real
Every transaction affects at least two accounts. Always identify the account type first, then apply the appropriate Golden Rule.
12. Common Mistakes While Applying Golden Rules
Mistake Correct Practice
Not identifying the account type. Identify Personal, Real or Nominal first.
Debiting income accounts. Income is always Credited.
Crediting expense accounts. Expenses are always Debited.
Treating Bank as Real Account. Bank is treated as a Personal Account.
Ignoring Double Entry. Every Debit must have an equal Credit.
Guessing entries. Apply the Golden Rules logically.
Most accounting errors occur because students skip the step of identifying the account type.
13. Real Business Case Study
ABC Mobile Shop
Transaction Entry
Owner invested ₹5,00,000 Cash Dr. / Capital Cr.
Purchased Mobile Phones ₹2,00,000 Purchase Dr. / Cash Cr.
Paid Shop Rent ₹15,000 Rent Dr. / Cash Cr.
Sold Goods ₹2,80,000 Cash Dr. / Sales Cr.
Received Commission ₹5,000 Cash Dr. / Commission Cr.
These are the same accounting entries you will record in Tally Prime using different voucher types.
14. Practical Exercise & Interview Questions
Practice Exercise
  1. Identify 10 Personal Accounts.
  2. Identify 10 Real Accounts.
  3. Identify 10 Nominal Accounts.
  4. Write Debit & Credit entries for 10 transactions.
  5. Classify each account correctly.
Interview Questions
  1. What are the Golden Rules of Accounting?
  2. How many types of accounts are there?
  3. What is a Personal Account?
  4. What is a Real Account?
  5. What is a Nominal Account?
  6. What is the Golden Rule for Personal Accounts?
  7. What is the Golden Rule for Real Accounts?
  8. What is the Golden Rule for Nominal Accounts?
  9. Why is Bank treated as a Personal Account?
  10. Why is the Double Entry System important?
15. Lesson Summary
  • Learned the three Golden Rules of Accounting.
  • Identified Personal, Real and Nominal Accounts.
  • Applied Debit and Credit correctly.
  • Solved practical business transactions.
  • Understood common accounting mistakes.
  • Practiced real-life accounting examples.
  • Prepared for interviews with important questions.
Congratulations! You can now confidently decide which account should be Debited and which should be Credited. This knowledge is essential before learning Journal Entries, Ledgers and Voucher Entry in Tally Prime.

🧠 Quick Quiz

According to the Golden Rules, how should Salary Account be treated?



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