Three golden Rules of accounting are Real, Nominal and Personal accounts
1 Personal Accounting : Debit the Receiver, Credit the Giver
2 Nominal Accounting : Debit all Expenses and Losses, Credit all Incomes and Gains.
3 Real Accounting : Debit What comes in, Credit what goes out.
According to Modern approach Accounts are classified into five groups:
According to Traditional approach Accounts are classified into three groups:
Real – all the assets except Debtors
Nominal – all the expenses, incomes, losses, gains.
Personal – all the accounts of persons, company or firms. these are further classified into three typesUnderstand below for your knowledge:
Debit and credit are the two aspects of every financial transaction. Their use and implication is the fundamental concept in the double-entry bookkeeping system, in which every debit transaction must have a corresponding credit transaction(s) and vice versa. Debits and credits are a system of notation used in bookkeeping to determine how to record any financial transaction. In financial accounting or bookkeeping, "Dr" (Debit) means left side of a ledger account and "Cr" (Credit) is the right side of a ledger account.
To determine whether one must debit or credit a specific account we use the modern accounting equation approach which consists of five accounting elements or rules. An alternative to this approach is to make use of the traditional three rules of accounting for: Real accounts, Personal accounts, and Nominal accounts to determine whether to debit or credit an account.
Debit what comes in and credit what goes out.
Debit is the receiver, Credit is the giver
All gains and income are credit, All losses and expenses are Debit