Golden Rules for types of accounts

As we know there are three types of account in double entry system. Each type of
accounts have different rule to find out the Debit & Credit.

Recommend Read: Examples of Golden Rules of Accounting

Rule of Real Account.
Real Account is an account does not close at the end of the Financial year and the
balances are carried forward to the next year.Generally Real accounts are accounts
which are related to Assets.

 Debit What comes In.

 Credit What Goes Out.
Explanation: Real account is related asset,Hence When an Asset is moving out of
business,That asset should be Credited,and when an asset coming in should be debited.
Tips for Debit and Credit
Debit When asset Increases.

Credit When asset Decreases.

Real Account Example 1 :Purchased Machinery from ABC for Credit 5000, Find out
the dual aspect.
Aspect 1 = Machinery Increases or coming in Business

Aspect 2 = Liability Increased or Credit the Given (refer the rule of personal account)

journal entry
JOURNAL

Date Particulars JF Debit Creidt

xx/xx/xxxx Machinery a/c …..Dr 5000

(Debit What comes In)

To; ABC A/c 5000

(Credit What Goes Out)

( Purchased Machinery from ABC for Credit

)
Real Account Example 2 : Computer Purchased For cash 25000
In this example, the two aspects are Computer & Cash , Both of these are assets and it is
one of the best example of real account transactions.

Computer -What Comes in = Debit

Cash – What Goes Out = Credit

Rules of personal account.

These are accounts related to Persons,Institutions,Companies, Trust or other form of
Institutions.

 Debit the receiver

 Credit the giver
Explanation: Personal account is related to individual or artificial persons created by
law like Corporates, LLP,LLC ,LTD etc.
When Money is paid or to be paid to a Person or company, That person should be
debited.

When Money is received or to be received from a person or company that person should
be Credited.

Personal Account Example 1: Purchased goods for 10000 from Abraham Mathew
The journal entry
Credit The giver -Here Giver is Abraham Mathew hence credited.

Debit All Expense – Purchase is expense to the company

JOURNAL

Date Particulars JF Debit Creidt

xx/xx/xxxx Purchase a/c …..Dr 10000

(Debit All Expenses)

To; Abraham Mathew A/c 10000

(Credit The Giver)

( Purchased goods for 10000 from Abraham

Mathew)
Tip : Credit when Liability Increases ( Here liability increases ,amount payable to
Abraham Mathew) Debit When Liability Decreases.
Personal Account Example 2 :Received cash from Micheal Trade Lines 5000
towards their pending payment.
In this example the components of transactions are Cash and Micheal Trade Lines. Cash
is asset, hence related to real account where as Micheal Trade links is a Customer or
Buyer who buys goods from us.Hence Micheal Trade Links is a person or related to
personal account.

Cash – What comes in – Debit

Micheal Trade Lines – The Giver – Credit
The Journal can be draft as follows.

Rules for Nominal Account

Nominal accounts report to revenue and expenses or loss or gains.It is a temporary
account and will be closed at the end of every Financial year by transferring the total to
the profit and loss account.

 Debit All expense or Losses

 Credit All Income or Gains.
Example:
Nominal Account Example 1 : Commission Paid 1000
The journal Entry
Nominal account rule – Debit all Expense -Commission is the expense

Real account rule – Credit what goes out – Cass (Asset) is goes Out

JOURNAL

Date Particulars JF Debit Creidt

xx/xx/xxxx Commision a/c …..Dr 10000

(Debit All Expenses)

To; Cash A/c 10000

(Credit What Goes Out)

( Commission Paid )
Nominal Account Example 2 : Bank Interest credited to SBI Bank account Rs
1200
Here the two sides of transactions are State Bank of India & Bank Interest. State Bank of
India is an asset account, that is Real Account and Bank Interest is an Income account,
hence related Nominal account.
State Bank Account – What Comes In – Debit
Bank charges – All Incomes –Credit
The journal entry is drafted as.

Tip: Debit When Expense Increase and credit when Income Increases.