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What Are The Six Golden Rule Of Accounting?

What Are The Six Golden Rule Of Accounting

The concept of the “Six Golden Rules of Accounting” is not a widely recognized principle in accounting. In traditional accounting, there are typically three golden rules, also known as fundamental principles, which guide the recording of financial transactions.

These are…

1. Debit what comes in, credit what goes out – This rule applies to assets and expenses. When an asset or an expense increases, it is debited; when it decreases, it is credited.

2. Credit what comes in, debit what goes out – This rule applies to liabilities, equity, and revenue. When a liability, equity, or revenue account increases, it is credited; when it decreases, it is debited.

3. Debit all expenses and losses, credit all incomes and gains – This rule indicates that expenses and losses are recorded by debiting them. In contrast, incomes and gains are recorded by crediting them.

These golden rules ensure that the accounting equation (Assets = Liabilities + Equity) remains balanced after every transaction and that the financial statements accurately reflect a business’s financial position and performance.