Accounting systems & Golden rules of Accounting

Accounting systems:

Single entry system: Which doesn’t follow the principles of double entry system is

called the single entry system. Transactions are recorded only in Cash Book and Personal A/cs.

Double entry system: This method of writing every transaction in two accounts is known as Double entry system. Every transaction is divided into two aspects viz. Dr and Cr.

Classification of Accounts:

1) Personal Accounts

Debit the receiver and Credit the giver

2) Impersonal Accounts

a) Real Account:

Debit what comes in and Credit what goes out

b) Nominal Account:

Debit all expenses and losses and Credit all incomes and gains

The golden rules of Accounting: The following are treated as the golden rules of accounting.

Debits ALWAYS EQUAL credits

Increases DO NOT NECESSARILY EQUAL Decreases.

Assets – Liabilities = Owner’s Equity (The Accounting Equation)

In some of the parts of the world the principles of types of accounts are alsocalled to be the Golden rules of accounting. They are:

· Personal Account: Debit the receiver and Credit the giver

· Real Account: Debit what comes in and Credit what goes out

· Nominal Account: Debit all expenses and losses and Credit all Incomes and Gains