Unlock Accounting Like a Pro!

Confused why some accounts get debited while others get credited? Every financial transaction follows 3 simple Golden Rules. Think of them as your GPS for navigating accounting – they tell you exactly where to record money coming in or going out. Let’s break them down step-by-step!

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Understanding the 3 Account Types

(Before learning rules, know what you’re recording!)

🏠 Real Accounts: The “What” of Business

• What they track: Physical and non-physical assets owned by the business
• Examples:
  • Cash in hand 💵
  • Computers and furniture 🖥️
  • Buildings and land 🏢
  • Patents and trademarks
• Key feature: These accounts stay with the business year after year

👥 Personal Accounts: The “Who” of Business

• What they track: People and organizations you deal with
• Examples:
  • Customers who owe you money (Debtors) 👨‍💼
  • Suppliers you owe money to (Creditors) 👩‍💼
  • Banks 🏦
  • Tax authorities 🏛️
• Key feature: They represent relationships

📊 Nominal Accounts: The “Why” of Business

• What they track: Profits, losses, incomes and expenses
• Examples:
  • Sales revenue 📈
  • Rent and electricity bills 📉
  • Salary expenses 👔
  • Interest earned 💰
• Key feature: Reset to zero every accounting year

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The 3 Golden Rules Demystified

Rule 1: For Real Accounts

“Debit what comes IN, Credit what goes OUT”
Why this works: Real accounts track assets. When assets enter the business, they increase – so we debit. When assets leave, they decrease – so we credit.

🖨️ Detailed Example: Purchased printer for ₹20,000 cash

1. Printer COMES IN → Debit Printer Account (asset increases)
2. Cash GOES OUT → Credit Cash Account (asset decreases)

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Printer A/c Dr. 20,000  
    To Cash A/c 20,000  
(Being printer purchased for cash)  

💡 Pro Tip: Works for ALL assets – whether buying computers, land, or patents!

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Rule 2: For Personal Accounts

“Debit the RECEIVER, Credit the GIVER”
Why this works: In any transaction between two parties, one receives benefit (debit) while the other gives benefit (credit).

📦 Detailed Example: Sold goods worth ₹50,000 to Raj Stores on credit

1. Raj Stores (Receiver) gets goods → Debit Raj Stores Account
2. Your business (Giver) provides goods → Credit Sales Account

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Raj Stores A/c Dr. 50,000  
    To Sales A/c 50,000  
(Being goods sold on credit to Raj Stores)  

💡 Real-life Connection:

• When you borrow money: Bank (GIVER) is credited, your Loan (RECEIVER) is debited
• When you pay supplier: Supplier (RECEIVER) is debited, Cash (GIVER) is credited

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Rule 3: For Nominal Accounts

“Debit ALL Expenses/Losses, Credit ALL Incomes/Gains”
Why this works: Expenses decrease business value (debit), while incomes increase value (credit).

💸 Detailed Example 1: Paid ₹8,000 mobile bill

1. Mobile expense (Loss) → Debit Mobile Expense Account
2. Cash (Asset going out) → Credit Cash Account

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Mobile Expense A/c Dr. 8,000  
    To Cash A/c 8,000  
(Being mobile bill paid)  

📈 Detailed Example 2: Earned ₹6,000 interest from bank

1. Cash (Asset coming in) → Debit Cash Account
2. Interest income (Gain) → Credit Interest Received Account

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Cash A/c Dr. 6,000  
    To Interest Received A/c 6,000  
(Being interest received from bank)  

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How These Rules Solve Real Problems

Case Study: Buying Goods on Credit

Transaction: Purchased goods worth ₹1,00,000 from Mehta Suppliers on credit

1. Identify accounts:
   • Mehta Suppliers (Personal Account – Creditor)
   • Purchases Account (Nominal Account – Expense)
2. Apply rules:
   • Rule 2: Mehta Suppliers (GIVER) → Credit
   • Rule 3: Purchases (Expense) → Debit

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Purchases A/c Dr. 1,00,000  
    To Mehta Suppliers A/c 1,00,000  
(Being goods purchased on credit from Mehta Suppliers)  

💥 Exam Hack:

When confused, ask these 3 questions:

1. Is this an asset? → Use Rule 1
2. Is this a person/company? → Use Rule 2
3. Is this income/expense? → Use Rule 3

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Your Golden Rules Cheat Sheet

Situation	Account Type	Rule	Action
Bought furniture cash	Real (Furniture)	Comes IN	Debit ✔️
Paid salary	Nominal (Expense)	Expenses	Debit ✔️
Received loan from bank	Personal (Bank)	GIVER	Credit ✔️
Sold goods to Rohan	Personal (Rohan)	RECEIVER	Debit ✔️
Interest income received	Nominal (Income)	Incomes	Credit ✔️

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Master These Rules in 3 Days!

1. Day 1: Practice only cash transactions
   • Focus on Rules 1 (Real) and 3 (Nominal)
2. Day 2: Practice credit transactions
   • Focus on Rules 2 (Personal) and 3 (Nominal)
3. Day 3: Practice mixed transactions
   • Combine all three rules

Golden Mantra:

“When asset enters – Debit it!
When expense occurs – Debit it!
When someone receives – Debit them!
Reverse for credits – Apply this logic!”