Are you exhausted of the bookkeeping complications, here is something that can turn your difficulty into an easy-go process. This is a prominent fact about the golden rules of accounting. We all know how important it is to have a basic understanding of accounting and business records so that when it comes to the correspondence of the accounting facts and financial position of your business to a wide range of communities, you can handle it efficiently. It matters a lot to keep your financial details in an organised manner, however, it is still required to keep a track of your accounting details to be well aware of where your business actually stands.
One of the confidence that the golden rules of accounting bring in to your staff members that they will have sufficient knowledge to communicate what is the plan of action and how to justify it while showcasing it to the public. The standards and rules related to accounting are equally important in this regard. This will further help the accountants and relevant staff members to have an understanding of how effectively these facts can be used for better growth of business in the future. Further in the discussion of this article, we will bring the golden rules of accounting into the limelight.
What are The Three Golden Rules of Accounting?
In the case, you are an individual who is familiar with the basic facts of accounting, you must realise that the basic set of rules related to accounting is a must to consider professionally along with the struggle of accomplishing other achievements for the growth of your business. Many of you might take the set rule easy, however, there are a few factors that bring in the level of complexity as well.
When you are in the process of dealing with multiple accounts, you will realise the complexity of this process. Moreover, it becomes tricky sometimes to have a better explanation of such facts to your audience and clients. The golden rules of accounting are a great helpful source in this regard. Let us delve into the discussion for further understanding.
1- Real Account – Credit What Goes Out and Debit What Comes In
The activities of a business in the field of property are all related to real accounts. People often find it a simple process of selling which is considered an outgoing business activity and purchases as an incoming business activity. However, there is a need for a real account of the incoming business activity related to your property business. This will be considered on the debit side in the business books. However, the business activity that is considered outgoing like the selling of a property will stay on the credit side in your accounting records.
2- Personal Account – Credit the Giver and Debit the Receiver
For individuals who are involved in business dealings, personal accounts are a great source of help in the way. The personal account is used to record all the details related to the receiving, this way it will be easy to showcase your timeline about what the business has received. The term receiver is also used in this matter. This will take the debit side of the records always. It is wise and recommendable to use the receiver’s account for debit purposes. On the other hand use giver’s personal account for the credit.
3- Nominal Account – Debit all Losses and Expenses
A business has to go through a roller coaster of ups and downs in form of losses and gains. In the journey of business growth, this considers a normal thing professionally. During this business journey, you will have to maintain records for small business details and relevant activities. This is where the use of a nominal account comes in. When your business is struggling with the stage of loss, you are required to debit this record in the bookkeeping. On the other hand, when a business is going through profit and gains, the professionals will use the credit side to maintain its record.
The Bottom Line
Now that you have gathered a fair amount of information about the golden rules of accounting, we can bring the discussion towards wrapping up. We can say that the rules of accounting are a great source of help for professionals to keep records maintained and organised. We hope these few minutes of reading will help you to develop a better understanding of the basic accounting rules and handle your accounts efficiently in the future.
Bookkeeping becomes tricky at times when you have higher chances of making an error in your ledger. Our professional and detail-oriented accountants can help you! Get in touch with us.
Disclaimer: All the information provided in this article on the golden rules of accounting, including all the texts and graphics, is general in nature. It does not intend to disregard any of the professional advice.