Professional Accountant's Formation-PAF

02/10/2025

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

1. Debit The Receiver, Credit The Giver

This principle is used in the case of personal accounts. When a person gives something to the organization, it becomes an inflow and therefore the person must be credit in the books of accounts. The converse of this is also true, which is why the receiver needs to be debited.

2. Debit What Comes In, Credit What Goes Out

This principle is applied in case of real accounts. Real accounts involve machinery, land and building etc. They have a debit balance by default. Thus when you debit what comes in, you are adding to the existing account balance. This is exactly what needs to be done. Similarly when you credit what goes out, you are reducing the account balance when a tangible asset goes out of the organization.

3. Debit All Expenses And Losses, Credit All Incomes And Gains

This rule is applied when the account in question is a nominal account. The capital of the company is a liability. Therefore it has a default credit balance. When you credit all incomes and gains, you increase the capital and by debiting expenses and losses, you decrease the capital. This is exactly what needs to be done for the system to stay in balance.

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.

02/10/2025

Peace be upon you. Dear member, our profession is such a profession where people from all walks of life have to come here. If they don't understand accounting, they won't be able to succeed in their field of work. If you want to be a merchandiser, you need to know costing. If you want to be an engineer, you need to understand accounting. In any profession, even in your personal life, if you don't know accounting, you won't be able to reach the pinnacle of success.

10/05/2025

Loan Terms: calculate the monthly installments.

Loan Amount: BDT 2,00,00,000

Interest Rate: 14% per annum

Loan Tenure: 30 monthly installments

Moratorium Period: 6 months (interest-only, no EMI)

06/05/2025

"Proficient in Tally ERP and other leading accounting software with a strong focus on accuracy, financial analysis, and reporting. Experienced in managing full-cycle accounting, inventory control, payroll, and statutory compliance. Continuously exploring new tools and technologies to enhance financial operations and decision-making efficiency.

06/05/2025

Why Accounting is the Backbone of Every Business

Accounting is not just about recording numbers—it's about understanding your business.

Through proper accounting, you can:

Track your income and expenses accurately

Make informed financial decisions

Ensure compliance with tax and legal requirements

Analyze profit trends and plan for the future

A strong accounting system gives business owners a clear picture of where they stand and what steps to take next.

At NRN Knitting and Garments Ltd., we apply these principles every day to support growth and sustainability.

Stay tuned for more educational insights on accounting and finance!

08/11/2024

Money brings money. So to been successes in life need to take risk. Investment and risk are the same thing And a good invest While investing can build wealth, you’ll also want to balance potential gains with the risk involved. And you’ll want to be in a financial position to do so, meaning you’ll need manageable debt levels, have an adequate emergency fund and be able to ride out the ups and downs of the market without needing to access your money.

01/11/2024

Fixed Costs
Fixed costs are those expenses that an organization incurs and that do not vary in relation to the level of production or activity. These costs remain constant in the short term, regardless of whether more units of a product are produced or more services are provided.

Common examples of fixed costs include facility rent, wages for salaried employees, insurance, and asset depreciation. These costs must be paid regularly, whether the company is operating at full capacity or experiencing a decline in production

01/11/2024

Cost Accounting
Cost accounting is a fundamental branch of accounting that focuses on recording, analyzing, and controlling the costs incurred by an organization in the production of goods or the provision of services. This discipline provides valuable information for business decision making, efficient resource management, and pricing.

16/05/2023