THE THREE GOLDEN RULES OF ACCOUNTING

            The three golden rules are defined to facilitate application of fundamental principles. These rules can be used to test any business transaction and to derive nature of accounting entries to be passed. We need to understand classification of accounts to know about three golden rules of accounting. Accounts have been classified into three categories. 

They are –

1.      Personal Accounts

2.      Real Accounts

3.      Nominal Accounts

1. Persona Accounts: Personal accounts are those which relates to persons or firms with whom the trader deals. Ex: Customers, Suppliers, Banks, Business firms, etc.,

2. Real Accounts: Real accounts are those which relates to assets, properties such as lands, building, furniture, etc., 

3. Nominal Accounts: Nominal Accounts are those which relates to incomes, expenses, profits and losses. These are also called Fictitious Accounts. Ex: Wages, Salaries, etc.,

Three Golden Rules

Type of Account	Debit	Credit
1.Personal Account	Receiver	Giver
2. Real Account	What comes in	What goes out
3.Nominal Accounts	Expenses and losses	Incomes and gains