Golden Rules of Accounting
The Problem with Debit Credit Rules
The system of debit and credit is right at the foundation of double entry system of book keeping. It is very useful, however at the same time it is very difficult to use in reality.
Understanding the system of debits and credits may require a sophisticated employee. However, no company can afford such ruinous waste of cash for record keeping. It is generally done by clerical staff and people who work at the store. Therefore, golden rules of accounting were devised.
Golden rules convert complex bookkeeping rules into a set of principles which can be easily studied and applied. Here is how the system is applied:
Ascertain the Type of Account
The types of accounts viz. real, nominal and personal have been explained in earlier articles. The golden rules of accounting require that you ascertain the type of account in question.
Each account type has its rule that needs to be applied to account for the transactions. The golden rules have been listed below:
The Golden Rules of Accounting
The golden rules of accounting allow anyone to be a bookkeeper. They only need to understand the types of accounts and then diligently apply the rules.
- Fundamental Principles of Accounting
- Different Types of Entities
- Different Types of Accounts
- Debits and Credits in Accounts
- Cash vs. Accrual Basis of Accounting
Authorship/Referencing - About the Author(s)
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