Three Golden Rules of Accounting [Explained With Examples]

Published in Business

September 23, 2015

In the accounting field, especially in the finance section, we are taught to create and pass the journal entries in the books of accounts. One must have knowledge of basic accounting rules in order to maintain the transactional entries.

There are three rules here which are known as the three golden rules of accounting, in short accounting golden rule. The name of those rules may vary from country to country, like – three golden rules of commerce, three golden rules of finance, and the golden rules of bookkeeping. In this article, I’ll try my best to explain those three golden rules of accountancy with examples and demonstrate usage of the rule.

Three Golden Rules of Accounting

What are the three golden rules of accounting?

Golden rules of accountancy are divided as Personal, Real, and Nominal accounts. This is the reason why we call it the three golden rules of accounting.

Let’s understand the rules of each and every account in detail.

1. Personal Account

The personal account relates to persons with whom a business keeps dealings.

A person called be a natural person or a legal person. If a person receives anything from the business, he is called a receiver and his account is debited in the books of the business. If a person gives anything to the business, he is called a giver and his account is to be credited in the books of the business.

The Golden Rule for Personal Account is,

Debit the Receiver and Credit the Giver
Three Golden Rule of Accounting: Personal Account

Example: Goods worth 1000 bucks sold to Mr. Smith from Mr. John. In this transaction, Mr. Smith is the receiver of goods, he is called a receiver and his account is to be debited in the books of business. Mr. John is the giver of goods, he is called giver and his account is to be credited in the books of business.

2. Real Account

The real account relates to property which may either come into the business or go from the business.

If any property or goods come into the business, the account of that property or goods is to be debited in the books of the business. If any property or goods goes out from the business account of, that property or goods are to be credited in the books of business.

The Golden Rule for Real Account is,

Debit What Comes In and Credit What Goes Out
Three Golden Rule of Accounting: Real Account

Example: Goods sold on cash for 1500 bucks. In this transaction cash, an asset for business, comes into the business on sales of goods, and therefore a cash account is to be debited in the books of business. On the other side, goods, assets of business goes out of the business on sale and therefore goods account is to be credited in the books of business.

3. Nominal Account

The nominal account is an account that relates to business expenses, loss, income, and gains.

If the business incurs expense to manage and run business, the account of that expense is to be debited in the books of business. When a business earns income by rendering services or hiring business assets, an account of that income is to be credited in the books of business.

On the other hand, if in the case of the transaction of a sale or purchase of goods or assets, if any loss is incurred by the business, the account of that loss is to be debited in the books of assets. If in the transaction of sale or purchase of goods or assets any profit is earned by the business, then the account of that profit is to be credited in the books of business.

The Golden Rule for Nominal Account is,

Debit All Expenses and Losses and Credit all Incomes and Gains
Three Golden Rule of Accounting: Nominal Account

Example 1: Paid 50 bucks as a commission to our agent, here, commission which is paid to an agent is a business expense, and it is to be debited in the books of business.

Example 2: Received 100 bucks as interest on our fixed deposit, here, interest which is received is business income, and therefore it is to be credited in the books of business.

Related Reads in Book of Accounts:

The above all are the three golden rules of accounting.

Topic Tags: Accounting, Accounts, Bookkeeping, Finance, nominal account, Personal Account, real account.

Post Author

Atul Kumar Pandey

Atul Kumar Pandey, the creator of the AtulHost website, is a business management graduate with a strong talent for business writing. He is also deeply passionate about technology, regularly exploring the latest trends and innovations. As an avid reader and techies, he enjoys trying out new ideas and staying ahead of the curve.

Responses to “Three Golden Rules of Accounting [Explained With Examples]”

Jagan

Oct 17, 2015 12:06 AM

Personal A/C and nominal A/C to be same?

Reply
1. Atul Kumar Pandey
  
  Oct 17, 2015 12:22 AM
  
  Let me clear your doubt Jagan, both the account types and scenarios are totally different.
  
  In a personal account, there is a relation between a person to any other person or party. So in the case of being in a business if any person is giving you goods or services then you should debit the name of the giver (because it’s a personal account) and credit the giver (your account).
  
  Whereas in nominal account the scenario is based on business things like business expenses, loss, income, and gains. So being a businessman you will debit all expenses and losses if occurs and credit all incomes and gains.
  
  Reply
Anumod Markose

Oct 17, 2015 10:12 AM

When a cash sales, should I mention the name of goods?
Or should I enter like, Cash a/c debit to sales?

Reply
1. Atul Kumar Pandey
  
  Oct 17, 2015 2:46 PM
  
  Yes Anumod right…
  When cash sales the entry would be as,
  
  Cash a/c … Debit
  Sales a/c … Credit
  
  and Journal entry for a Cash Sales would be like this.
  
  Acc. | Dr. | Cr.
  —————-
  Cash | 300 | —
  Sales| — | 300
  —————-
  Total| 300 | 300
  
  Reply
2. AtulHost
  
  Oct 19, 2015 6:20 PM
  
  Hi Anumod, Ashok Kumar Vaishnav answered your question too.
  
  Reply
Shah Mohammed

Oct 19, 2015 2:04 PM

Hello, I had a student of science after 3 year I took a admission in fybcom so commerce is totally new for me I have 1 doubt on how to identify personal account real account and nominal account in Question please?

Reply
1. AtulHost
  
  Oct 19, 2015 6:35 PM
  
  Personal Account: The accounts and elements which represent persons and organizations.
  – Mrs. Aarti’s A/c – representing Mrs. Aarti an individual.
  – M/s Arun & Co A/c – representing M/s Arun & Co. an organization.
  – Capital A/c – representing the owner of the business, a person or organization.
  – Bank A/c – representing Bank, an organization.
  
  Real Account: The accounts and elements which represent tangible aspects.
  – Cash a/c – representing cash which is tangible.
  – Goods/Stock a/c – representing Stock which is tangible.
  – Furniture a/c – representing Furniture which is tangible.
  
  Nominal Account: The accounts and elements which represent expenses, losses, incomes, gains.
  – Salaries a/c – representing expenditure on account of salaries, which is an expense.
  – Interest received a/c – representing income on account of interest, which is an income.
  – Loss on sale of Asset a/c – representing the loss incurred on sale of assets, which is a loss.
  
  I hope this will clear your doubt about identifying three different accounts type in golden rules for accounting.
  
  Reply
Ashok Kumar Vaishnav

Oct 19, 2015 3:12 PM

Not required to mention the nature or product name, only cash received against cash sales naration is enough.

Reply
1. AtulHost
  
  Oct 19, 2015 6:18 PM
  
  Thanks Ashok for your contribution and answering question of Anumod Markose.
  
  Reply
Abhishek Kr Singh

Oct 27, 2015 6:34 PM

Graduation Level Accounting Questions With Answers. Thanks for Posting it.

Reply
Vivek

Nov 9, 2015 7:47 PM

What about Capital A/c and liabilities? Where does it come in golden rules?

Reply
1. AtulHost
  
  Nov 13, 2015 4:45 PM
  
  Hi Vivek, Capital A/c and liabilities are noted in Journal entries and it follows the Golden Rules of Account. Capital account comes under Personal Account and Liabilities are like loan and debt so such kind of entries are recorded under Balance sheet.
  
  Reply
Mary

Nov 12, 2015 9:53 AM

Hi, My question is if we consider personal account is for person or an organisation. Now if a person or an organization incurs an expense of commission. Now how the rule should we apply. Is it to be Dr the receiver Cr the giver or Dr all expense and loss and Cr all income.

Reply
1. AtulHost
  
  Nov 13, 2015 11:47 AM
  
  Hi Mary, first of all let me clear your first point i.e., Personal Account could be only or a person not for organization. (Personal account relates to persons with whom a business keeps dealings) So use this rule, Debit the Receiver, Credit the Giver. It’s simple just try to identify the kinda account.
  
  Reply
2. ravikant
  
  Sep 6, 2016 2:26 PM
  
  Dr all expenses or loss
  Cr all income and gains or profit
  
  Reply
Shazia

Nov 13, 2015 6:37 PM

Hi, I have a big doubt in the types of Personal Accounts can you pls. clear it. Pls pls because my exams are closer…

Reply
1. AtulHost
  
  Nov 13, 2015 8:31 PM
  
  Hi Shazia, as far as I know there is no kinda types in Personal account as there are three kinda accounts as Personal Account, Real Account and Nominal Account. But in modern accounting world three accounts you might see under Personal Account i.e.,
  
  – Natural Account: It is related to individuals or natural persons made of flesh and bones.
  – Artificial Account: It is related to artificial person recognized by Law – such as Manipal Learning Ltd, SBI, RBI, BEL. BHEL etc.
  – Representative Account: Account of groups or representative such as Debtors, Creditors, outstanding expenses and prepaid insurance.
  
  I hope this will help you a lot. Good Luck.
  
  Reply
Naman jain

Nov 19, 2015 3:28 PM

Hello Sir,

Thanks for your valuable guidance. It is very beneficial or us and also thanks for clearing all doubts in one place.

Regards,
Naman Jain

Reply
Sowmya

Nov 20, 2015 3:57 PM

Hi Atul,

I know Land does not have depriciation but it has appreciation value. Can you please explain how and why?

Reply
1. AtulHost
  
  Nov 21, 2015 12:01 AM
  
  Yes Sowmya, You are right. One way I can explain you this case with the help of demand and supply rule.
  
  Rule 1: When Demand Increases and Supply Decreases the Price of Value Increases and Vice Versa.
  Rule 1: When Demand Decreases and Supply Increases the Price of Value Decreases and Vice Versa.
  
  For an asset there is always supply thus, there is more space of production, but land is limited and very scarce. Therefore due to more demand and less supply of land the land always has an appreciation value. I hope you got my point very well.
  
  Reply
rakesh mohanty

Nov 23, 2015 3:00 PM

Good afternoon sir, please solve my doubt. What is difference between book keeping and accounting?

Reply
1. AtulHost
  
  Nov 23, 2015 8:51 PM
  
  Hi Rakesh,
  
  The accounting process involves recording, interpreting, classifying, analyzing, reporting and summarizing financial data. Bookkeeping is the process of recording financial transactions. Recording financial transactions is the first part of and the foundation of the accounting process.
  
  Reply
Annies

Nov 23, 2015 5:28 PM

Hello Mr. Atul, I have one small doubt in nominal account. Why expenses is to be debited in nominal account, may I know the reason?

Reply
1. AtulHost
  
  Nov 23, 2015 8:44 PM
  
  Simply I can say is because it is the Golden rules of account. But it is recorded in debit side because the balances on the right side of an account are credit balances. Since expenses cause a decrease to the owner’s equity credit balance, a debit entry is required. However, at the time that the expense is recorded, the amount is entered as a debit in an expense account.
  
  Reply
Satyadeep Mohanty

Nov 24, 2015 7:22 PM

What if ABC Ltd. has not paid the salary of June month, then what account will be debited and what account will be credited.

Reply
1. AtulHost
  
  Nov 25, 2015 11:10 PM
  
  Unpaid salaries are salary liabilities (salary outstanding) that you have incurred but have not paid. You must record all accrued salaries, employment taxes and related compensation expenses in the same period in which they are incurred. Here I am presenting 2 cases, one salary is unpaid and another is outstanding salary paid.
  
  1. Salary Outstanding
  
  Acc. | Dr. | Cr.
  —————-
  Salary A/c… Dr.
  To Salary Outstanding A/c
  (Being salary unpaid or due)
  
  2. Outstanding Salary Paid
  
  Acc. | Dr. | Cr.
  —————-
  Salary Outstanding A/c… Dr
  To Bank/Cash A/c
  (Being due salary cleared)
  
  I hope this will be helpful to you.
  
  Reply
Rakesh Kumar Mohanty

Nov 25, 2015 7:11 AM

Sir, Which transaction are recorded in debit side in journal, but these transaction are changed in credit side in ledger. Why it is change?

Reply
1. AtulHost
  
  Nov 25, 2015 10:57 PM
  
  Hello Rakesh, as I understand your question is about change of debit side entries of journal to credit side entries or vice-versa when we are adding entries from journal to ledger. account. It is recorded in opposite direction because your credit is someones debit and someones credit is your debit. It changes because the account has been changed. Ledger is always made for specific account, goods and services and it is more detailed in nature.
  
  Reply
Abhinov Bhardwaj

Dec 6, 2015 12:42 PM

Sir, My question is, what is the major difference between Public Accounting and Private Accounting?

Reply
1. AtulHost
  
  Dec 6, 2015 2:23 PM
  
  Hello Abhinov, thanks for asking a nice question. So Public account is account where you deal with business systems and where strong analytical is required. Whereas in Private account you mostly deal in business process, and need to know industry standards.
  
  Reply
Randeep Singh

Dec 31, 2015 9:55 AM

Hlo Sir I Have an Question about the dishonour of a bill.

Reply
1. AtulHost
  
  Dec 31, 2015 10:09 AM
  
  A bill is said to dishonoured when a drawee fails to make the payment on the date of the maturity. In this case, liability of the acceptor is restored. Thus, the entries made on the receipt of the bill as reversed. Let’s say if ABC received bill of exchange accepted by XYZ, which dishonoured. Then entries of dishonour will be as,
  
  Acc. | Dr. | Cr.
  —————-
  XYZ A/c Dr.
  To Bills Receivables A/c
  (Being a bill dishonoured )
  
  I hope this will be helpful to you.
  
  Reply
Prudhvi raj chowdary

Jan 4, 2016 5:41 PM

Hi Atul, one of my friend got question when she attend for an interview.
Interviewer question: why we need to prepare trading account when we are preparing P&L A/c. and Balance Sheet.

Reply
1. AtulHost
  
  Jan 4, 2016 9:39 PM
  
  Hi Prudhavi, it’s a basic thing to know. When we create a final account which is Profit and Loss account and Balance sheet we need to calculate first gross profit and loss; on the basis of which final accounts are created. Trading Account is the first stage in the process of preparing final accounts. Trading account shows the gross profit or gross loss during an accounting year. Thus, we need to prepare trading account first when we are preparing Profit and Loss account and Balance sheet.
  
  Reply
  1. Mr. Rajendra Gujrati
    
    Jul 24, 2017 9:10 PM
    
    First we need to find out the profit from core operating activities, because that is necessary to our core activities as they are profitable or not. Then secondary things will be considered.
    
    Reply
shivu

Jan 5, 2016 4:26 PM

Sir, can you please tell me the journal entry of “cash eaten by rat”?

Reply
1. AtulHost
  
  Jan 5, 2016 5:14 PM
  
  Hi Shivu, the cash eaten by rat doesn’t comes under abnormal loss and insurance claims. The loss on theft of cash and any other assets may be simply be expensed to the income statement net of any insurance claim received or receivable. Following accounting entries would therefore be required:
  
  Acc. | Dr. | Cr.
  ——-
  Loss on asset theft (balancing amount) A/c Dr.
  Accumulated Depreciation A/c Dr. (If it is required)
  To Asset (carrying amount) A/c.
  
  Incase if it was assets which has a claim by insurance company then there would be 2 more entries thus I am making a case here to explain how all entries will go. In this case, when insurance company is ready to give some percentages of claim.
  
  Acc. | Dr. | Cr.
  ——-
  Loss due to Accident A/c Dr.
  Insurance Claim A/c Dr.
  To Trading A/c Cr.
  (Being cash eaten by rat and insurance claim received)
  
  Entry for transferring loss to Profit & Loss A/c.
  
  Acc. | Dr. | Cr.
  ——-
  Profit & Loss A/c Dr.
  To Loss due to Accident A/c
  (Being entry recorded for transferring loss to Profit & Loss A/c)
  
  Reply
2. sanjeev
  
  Sep 21, 2016 9:35 PM
  
  Loss by rats (or by any cause like loss by flood, loss by theft, loss by embezzlement, etc.) a/c …… Dr.
  Cash a/c …… Cr.
  
  Reply
ravi

Jan 6, 2016 2:49 PM

Hi,

I have a query regarding Accounts. Many times I have rejected in final round of interview only because of accounts knowledge. In my current organization or previous organization I never used these accounting thing, what I have learnt in my school and college life. Mostly I have experience of accounts receivable.

So could you please tell me what should I have brush up before going to an interview. Because mostly every interviewer ask golden rule of accounts that I know. Anything you can suggest or any entries which they are surely ask for accounts receivable process.

Reply
1. AtulHost
  
  Jan 6, 2016 10:22 PM
  
  Hi Ravi, Glad to know that you are talking about practical uses of this. Basically when we are in colleges we tough predefined journal entries and accounting methods, but once we enter in the practical world nothing other than basic rules are followed. Thus, I would like suggest that make habit of learning current cases going on everywhere.
  
  Nowadays no one make journal entries on books but the same things are done with accounting software (My CA uses “QuickBook” for accounts and invoices; he also follows the real cases of multinational companies to make himself updated). So it’s better to learn more on real life transactions other than what we have studied yet.
  
  Reply
dinesh

Feb 2, 2016 12:16 PM

Hi Atul, first of all thanks for sharing this amazing accountancy rules with us. I have a question that loan from bank is a personal a/c or nominal a/c or real a/c?

Reply
1. AtulHost
  
  Feb 3, 2016 1:02 AM
  
  Hello Dinesh, from the fundamentals of accountancy, bank loan accounts for customer is Personal account and for banks it is a Real account.
  
  Reply
Nishant

Mar 18, 2016 11:04 PM

Hello Atul, I want to know difference between prepaid and postpaid expenses.

Reply
1. AtulHost
  
  Mar 19, 2016 6:01 PM
  
  Hi Nishant, first of all thanks for presenting your query in account. Prepaid Expenses represent goods or services delivered over a period of time, but which are paid in a lump sum at the beginning of that time period. Whereas Postpaid Expenses are just opposite to it. The amount of prepaid expenses that have not yet expired are recorded on a company’s balance sheet as an asset. Whereas postpaid expenses are recoded on a company’s balance sheet as an liability.
  
  Reply
Ratnakar sahu

Apr 7, 2016 11:57 PM

Thank you sir for posting such a difficult topic in simple way. Examples are really helpful.

Reply
Salman Khan

Apr 21, 2016 4:21 PM

Hi Atul, I want to know what is different between Gross Profit and Net Profit.

Reply
1. AtulHost
  
  Apr 26, 2016 11:35 PM
  
  Hi Salman, Gross profit is sales revenues minus the cost of goods sold. Net Profit means all revenues minus all expenses including the cost of goods sold, the selling, general, and administrative expenses, and the non-operating expenses.
  
  Reply
Vikas Kumar

May 9, 2016 5:04 PM

Dear Sir,

Greetings !

What is the trail balance sheet.

Reply
1. AtulHost
  
  May 11, 2016 3:54 PM
  
  It is not known as trial balance sheet, but it is “Trial Balance” which consists of all you transactions of every nature.
  
  Reply
Rajan

May 10, 2016 4:44 PM

What is the basic rule of committee account or how to prepare a committee account sir please tell me immediately jts very urgent for me

Reply
1. AtulHost
  
  May 11, 2016 4:11 PM
  
  Whatever be the account the golden rules of account will be same and applicable to all kinds of account.
  
  Reply
Siraj Sikku

Nov 4, 2016 8:18 AM

Cash paid to Etisalat is refundable deposit 2000dhs? How is entry?

Reply
1. AtulHost
  
  Nov 5, 2016 10:57 AM
  
  It must go like it,
  
  Refundable Deposit … Dr.
  To Cash … Cr.
  
  Also, You may appropriately indicate which the corresponding account is affected, example, refundable deposit – internet or refundable deposit – telephone and similar accounts.
  
  Reply
vivekanand jha

Nov 9, 2016 1:22 PM

Hi Sir, could you please tell me what should the entry when my furniture lost due to ant.

Reply
1. AtulHost
  
  Nov 9, 2016 2:53 PM
  
  Hi Vivekanand, first of all confirm that this entry is covered by insurance or not. If yes then it will go like below example.
  
  1. Entry for purchase of goods.
  
  Purchase A/c…Dr. 400000
  To Cash A/c 400000
  
  2. Entry for recording loss of goods and creating insurance claim.
  
  Loss Due to Accident A/c…Dr. 100000
  Insurance Claim A/c……..Dr. 300000
  To Trading A/c 400000
  
  3. Entry for transferring loss to Profit & Loss A/c.
  
  Profit & Loss A/c………Dr. 100000
  To Loss Due to Accident A/c 100000
  
  Reply
  1. vivekanand jha
    
    Nov 9, 2016 3:00 PM
    
    If entry is not covered by insurance then what should the entry
    
    Reply
    1. AtulHost
      
      Nov 9, 2016 3:21 PM
      
      It’s simple just remove the insurance part and adjust the loss amount.
      
      1. Entry for purchase of goods.
      
      Purchase A/c…Dr. 400000
      To Cash A/c 400000
      
      2. Entry for transferring loss to Profit & Loss A/c.
      
      Profit & Loss A/c………Dr. 400000
      To Loss Due to Accident A/c 400000
      
      Reply
    2. AtulHost
      
      Nov 9, 2016 3:32 PM
      
      It’s simple just remove the insurance part and adjust the loss amount.
      
      1. Entry for purchase of goods.
      
      Purchase A/c…Dr. 400000
      To Cash A/c 400000
      
      2. Entry for recording loss of goods
      Loss Due to Accident A/c…Dr. 400000
      To Trading A/c 400000
      
      3. Entry for transferring loss to Profit & Loss A/c.
      
      Profit & Loss A/c………Dr. 400000
      To Loss Due to Accident A/c 400000
      
      Reply
swapnil

Nov 30, 2016 10:37 AM

Dear sir, I want to know entry for debit note and credit note.

Reply
1. AtulHost
  
  Nov 30, 2016 3:47 PM
  
  When the purchaser returns the goods to the seller the Purchaser sends a Debit Note to the seller (ie. the purchaser debits the seller in his books ie. Purchasers Books) and the Seller sends a Credit Note to the purchaser (ie. the seller credits the Purchaser in his Books ie. Sellers Books). Following are the Journal Entries to be passed:
  
  Entry for Credit Note:
  
  Sales Return inward A/c. ………. Dr.
  Output VAT A/c. ………. Dr.
  To Debtor A/c.
  (Being goods returned by the customer)
  
  Entry for Debit Note:
  
  Creditor A/c. ………. Dr.
  To Goods Return A/c.
  To Input VAT A/c. (i.e. Reverse Credit)
  (Being goods sent back to the seller)
  
  Reply
Chandu

Jan 2, 2017 3:42 AM

Nice information for all accounting related students

Reply
1. AtulHost
  
  Jan 2, 2017 3:29 PM
  
  Thanks Chandu for your kind feedback. Don’t forget to subscribe us.
  
  Reply
Hunar

Jan 3, 2017 12:34 PM

Your way of explanation is very simple and goes directly into the mind. Loved it.

Reply
1. AtulHost
  
  Jan 7, 2017 2:09 PM
  
  Thanks, Hunar for your feedback.
  
  Reply
shalini

Jan 5, 2017 2:58 PM

Sir what would be the entry for salary paid to kishan rs. 4000 and why?

Reply
1. AtulHost
  
  Jan 7, 2017 2:24 PM
  Hi, Shalini, the entry for salary made would be like this…
```
Salary A/c. ....Dr.
To Cash A/c. ...Cr.
```
  Because salary is the expense that’s why it is debited and cash is going out so it is credited.
  Reply
2. shalini
  
  Jan 8, 2017 7:22 PM
  
  Why don’t we debit Kishan’s A/c. since the receiver shall be debited?
  
  Reply
  1. AtulHost
    
    Jan 10, 2017 11:16 AM
    
    Since you are making a payment as Salary when you pay for any purpose your need to make an entry in the form of account.
    
    Reply
Sameekshaa Jankar

Feb 6, 2017 12:00 PM

All the expenses and losses come on the nominal side but why outstanding expenses come on the personal side?

Reply
1. AtulHost
  
  Feb 16, 2017 2:04 PM
  
  Nominal accounts prefixed or suffixed with the terms outstanding, prepaid, or pre-received are personal accounts. Because Outstanding Expenses A/c is a personal account with a credit balance. The balance indicates the amount that is owed by the Organisation on account of unpaid expenditure.
  
  Reply
Ziya Saif

Feb 15, 2017 9:09 PM

Hi Atul Sir, I have big problems with journal entries, sometimes I couldn’t understand which a/c should be debited and which should be credited. So, Please clear me.

Reply
1. AtulHost
  
  Feb 16, 2017 1:47 PM
  
  Hi, Ziya, passing journal entries in books of account is somewhat difficult if you are not paying attention to three golden rules of account. However I have written an article on Journal Entries in Accounting: Basics, have a look and do some problem solving it will sure help.
  
  Reply
2. Badal
  
  Dec 14, 2017 1:01 AM
  
  Hi Ziya, always remember in an easy way like –
  
  “Giver was Rich then it is always in Credit and Receiver was Poor then it is always in Debit”.
  
  Reply
Jeet

Feb 24, 2017 2:55 PM

Simple and straight answers. Thanks, Atul.

Reply
1. AtulHost
  
  Feb 24, 2017 6:20 PM
  
  You’re welcome Jeet. Stay tuned for more accounting updates.
  
  Reply
Eva Kiden

May 25, 2017 1:58 PM

Hey Atul Kumar, Thanks very much for your time and effort on answering such questions. I have also something to ask:

1. From the three a/c rules, which one can be apply for Liabilities and Capital A/c.?
2. What is the difference between adjusted trial balance and unadjusted trial balance?
3. What are their advantages in accounting.

Regards,
Eva Jacks

Reply
1. AtulHost
  
  May 26, 2017 11:21 AM
  
  Hi, Eva, thanks for your feedback and I am glad that you have shown interest in accounts. Below is the answer to all your queries.
  
  1. Liabilities are noted under Real A/c. and Capitals are noted under Personal A/c.
  Read more about Classification of Accounts here.
  
  2. The differences between an adjusted trial balance and an unadjusted trial balance are the amounts recorded as part of the adjusting entries. Adjusted trial balance is one where are the adjustments are taken into consideration and its final. Un-adjusted trial balance is in its intermediary state and there are adjustments to yet to be made to them.
  
  3. Trial balances give a snapshot of the state of the company at periodic intervals, such as monthly or quarterly, by looking at all entries in the company’s general ledger.
  
  I hope your all doubts are clear now.
  
  Reply
Poonam

Sep 6, 2017 6:32 PM

Hello sir, Please clear me here – the (debit the receiver, credit the giver) rule for Personal A/c. Why we debited the receiver? For example: I paid Rs. 1000 to Ram. It means ram is reciver and Ram is debited by 1000. Since I gave the money, my account should be debited and vice versa. But double entry rule says opposite and it confuses me all time. Please help me.

Reply
1. AtulHost
  
  Sep 7, 2017 11:02 AM
  
  Hello, Poonam, I can understand that account is not easy to start, we have to understand the whole process first. Let’s come to the point. Double-entry accounting is based on the fact that every financial transaction has equal and opposite effects in at least two different accounts. So each entry has to be recorded by maintaining the relations.
  
  Reply
Okunzuwa Sarah

May 4, 2018 2:51 PM

Good afternoon sir, first of all thanks for making this simple to us. Please my question is what are the likely questions interviewer asked in term of accounting in bank for instance.

Reply
1. AtulHost
  
  May 5, 2018 4:16 AM
  
  Thanks for the comment Okunzuwa Sarah. This seems to be career based question so I better answer in that way. You will be asked questions like payments, receipts, outstanding, taxes, bills of exchange and all. You’ll be asked any question that related to banking sector and based on real life transactions. Most bank uses accounting software here are some of them – CGram Software, Financial Force, Microsoft Accounting Professional, Microsoft Dynamics AX and Microsoft Small Business Financials.
  
  Reply
Sourav Biswas

May 22, 2018 9:47 PM

Sir, Please tell me the entry of “Interest received from bank”. Here interest is a Nominal A/c and bank is Personal A/c.

Reply
1. AtulHost
  
  May 23, 2018 11:45 AM
  It’s so simple Sourav,
```
Bank A/c ............... Dr.
To Interest Received ... A/c
(Being Interest Received in Bank's Account)
```
  Explanations:
  
  – Bank A/c. comes under Personal A/c.; so the rule we applied here is “Credit The Giver”.
  – Interest Received A/c. comes under Nominal A/c.; so the rule is “Credit All the Incomes and Gains”.
  Reply
Sourav Biswas

May 23, 2018 2:16 PM

Thanks sir but will be in credit leg?

Reply
1. AtulHost
  
  May 23, 2018 6:11 PM
  
  Yes Sourav, Interest Receive will be on credit side.
  
  Reply
Sridhar Parida

Nov 29, 2018 8:24 AM

Good morning sir, I have a doubt in a transaction i.e. trade discount allowed to customer on sale which account should be debited. Please give me answer.

Reply
1. AtulHost
  
  Nov 29, 2018 9:32 PM
  
  First of all, trade discounts are not recorded in journals. You should use final net amount while making any entries.
  
  Reply