Accounting explained
Golden Rules of Accounting: Meaning, Format and Example
The golden rules are the traditional way Indian students and accountants learn which account to debit and which to credit. Classify the account first, then apply its rule.
The three types of account
| Type | What it covers | Examples |
|---|---|---|
| Personal | People, firms and institutions, including the owner | Sri Ganesh Agencies, a customer, the bank, Capital, Drawings |
| Real | Things the business owns | Cash, stock, furniture, computer |
| Nominal | Expenses, losses, incomes and gains | Rent, salary, sales, discount received |
The three golden rules
| Account | Debit | Credit |
|---|---|---|
| Personal | The receiver | The giver |
| Real | What comes in | What goes out |
| Nominal | All expenses and losses | All incomes and gains |
Worked examples from Sri Lakshmi Stores
| Transaction | Accounts and types | Entry |
|---|---|---|
| Pays ₹52,500 to Sri Ganesh Agencies by bank | Supplier (personal, receiver); Bank (personal, giver) | Dr Sri Ganesh Agencies, Cr Bank |
| Buys a ₹50,000 computer and printer for cash | Computer (real, comes in); Cash (real, goes out) | Dr Computer, Cr Cash |
| Pays salary of ₹18,000 in cash | Salary (nominal, expense); Cash (real, goes out) | Dr Salary, Cr Cash |
| Receives ₹500 discount from a supplier | Supplier (personal, giver of the benefit); Discount received (nominal, gain) | Dr Supplier, Cr Discount received |
| Sells goods on credit to Annapoorna Mess for ₹12,000 (before GST) | Customer (personal, receiver); Sales (nominal, income) | Dr Annapoorna Mess, Cr Sales |
| Ramesh takes goods worth ₹2,000 home | Drawings (personal, the owner receives); Purchases (goods go out) | Dr Drawings, Cr Purchases |
The modern rules give the same answer
Most textbooks today also teach the "modern" or accounting-equation approach: assets and expenses increase with a debit, liabilities, capital and income increase with a credit. Both methods lead to the same entries. The golden rules are easier to remember for simple transactions; the modern rules are easier when an account does not fit neatly into one type. Our page on debit and credit sets out the modern rules.
Common mistakes
- Treating the bank as a real account; in this system it is personal, like any other institution
- Crediting Sales for capital brought in by the owner
- Debiting the supplier when goods are bought on credit; the supplier is the giver and is credited
- Calling a prepaid expense nominal; it is an asset until used
- Forgetting that the owner is a separate person from the business
Practising with the sample shop
Try these from Sri Lakshmi Stores' year before reading the answers. Rent of ₹20,000 paid by bank: Rent is nominal (expense, debit), Bank is personal (giver, credit). A cash sale of ₹38,500: Cash is real (comes in, debit), Sales is nominal (income, credit). Ramesh brings ₹1,00,000 from his savings into the bank: Bank is personal (receiver, debit), Capital is personal (Ramesh is the giver, credit). Depreciation of ₹30,000: Depreciation is nominal (loss, debit), Accumulated depreciation reduces a real account (credit).
Key terms on this page
- Personal account: an account for a person, firm or institution, including the owner and the bank
- Real account: an account for something owned, such as cash, stock or furniture
- Nominal account: an account for an income, expense, gain or loss
- Representative personal account: an account standing for a person, such as outstanding rent or prepaid insurance
About the worked example
The examples on our accounting pages follow one shop through one year: Sri Lakshmi Stores, a kirana in Mysuru owned by Ramesh, for the financial year 2025-26. It sold ₹48 lakh of goods (before GST), made a gross profit of ₹10.4 lakh and a net profit of ₹4.7 lakh, and ended the year with a balance sheet total of ₹7.95 lakh. The figures are illustrative but they add up across every page, so you can follow one transaction from the journal to the balance sheet.
How TripleBill handles it
TripleBill applies the right debit and credit to every document automatically, so you do not need to classify accounts for routine work. The rules matter when you write a manual journal, and the journal screen will not save unless debits equal credits.
General information on bookkeeping, not accounting or tax advice. For your final accounts and filings, consult a chartered accountant.
Last reviewed
Last reviewed: November 2026.
- Reference: ICAI Foundation course study material, chapter on accounting procedures
Frequently asked questions
What are the golden rules of accounting?
Personal accounts: debit the receiver, credit the giver. Real accounts: debit what comes in, credit what goes out. Nominal accounts: debit expenses and losses, credit incomes and gains.
Is capital a personal account?
Yes. Capital represents the owner, so it is treated as a personal account, and is credited when the owner brings money in.
Is the bank a real or personal account?
Personal: the bank is an institution that owes you the balance.
Are the golden rules still used?
Yes, especially in Indian commerce education. The modern rules give the same entries.
Which rule applies to GST payable?
GST payable is owed to the government, a personal account in the traditional system, so it is credited when tax is collected and debited when paid.
How do I classify outstanding rent?
It is a representative personal account: credited when the rent is due but unpaid, debited when paid.
How do I classify GST input credit?
Input credit is an amount recoverable from the government, so it is treated like a personal account (a debtor): debited when the credit arises and credited when it is set off.
Why do textbooks call these "golden" rules?
Because for most everyday transactions, identifying the account type and applying its one-line rule gives the right entry every time, without needing to think about the accounting equation.
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