Golden rule of Accounts

Three rules are determine which accounts will debit and which will credit. it is known as golden rules. As we know A/c heads are divided into three types

1. Personal a/c
2. Real A/c
3. Nominal A/c

The golden rules for the different Account will be

1. Personal A/c

Debit the receiver and Credit the Giver

2. Real A/c

Debit which comes in and Credit which goes out

3. Nominal A/c

Debit all Expenses & losses and Credit all income & gains

Important terms of Accounts

Assets: Everything which helps a business to earn cash in long-term is known as an asset of the business. These assets are three types

1. Fixed Asset: These types of the assets are acquired for relatively long periods. It generates long-term revenue for the business. Eg. Land, Building, plant, machinery, furniture etc.
2. Current Asset: These types of the assets are generates revenue for the business in very short time. Eg. Cash, bank, debtors, inventories, bill receivable etc.
3. Liquid Asset: These types of the assets can immediately convert into cash without much loss. Eg. Marketable securities, short-term investments, stamps etc.

Liabilities: Everything which business owns from the others and bound to return in form of cash or others way. Eg loan from bank or others, trade creditors etc.

Capital: It refers the amount invested by the proprietors in a business enterprise. It is a personal A/c. capital A/c are two types

• Own capital: These types of capital generally invested by the proprietor himself. If someone gives capital to business but business have no liabilities to provide interest against that capital then those capital is also known as Own Capital.
• Loan capital:
  • Secure Loan: These types of loans are provided by the investor against some security property. If the business fails to return the loan in time then the investor can recover they selling the said property of the business.
  • Unsecured Loan: These types of loans are provided by the investor without any security property.