Golden Rules of Accounting
Definition
Traditional rules for recording entries by account type: debit the receiver and credit the giver (personal), debit what comes in and credit what goes out (real), and debit expenses and losses and credit incomes and gains (nominal).
Related Terms in Accounting Principles
Nominal Account
An account for incomes, expenses, gains and losses, closed to the profit and loss at period end. It contrasts with real accounts (assets) and personal accounts (people and entities).
Real Account
An account for assets and property whose balance carries forward from one period to the next rather than being closed to profit and loss. Examples include cash, inventory and equipment.
Personal Account
An account relating to persons or entities a business deals with, such as customers, suppliers and lenders. Its balance represents amounts owed to or by those parties.
Adjusting Entries
Journal entries posted at the end of a period so that revenue and expenses fall in the right period under accrual accounting. The usual categories are accruals, prepayments, depreciation, and provisions such as doubtful debts.
Stop memorising terms — let HelloBooks do the work
AI-assisted bookkeeping that handles invoicing, GST, reconciliations, and reports automatically. Free to start.