It is crucial for every entrepreneur to have accurate financial information to make good business decisions. The financial information must present a true picture of the business to meet correct decisions. It is important to have proper accounting for every transaction to ensure that the financial information is accurate. The three golden rules of accounting help accountants account for every financial transaction accurately.
Accounts golden rules form the basis of principles to record financial statements. These golden rules of accounting are also known as traditional accounting or debit and credit accounting rules. It is important for you to understand that these three rules apply to different three account types in accounting. You can also consult with the best accounting firms in Dubai to know better about these golden rules of accounting.
This talk will help you to know about the complicated task of recording financial transactions and the three golden accounting golden rules.
What Are The Golden Rules Of Accounting?
Accounting has a set of revolutions for recording day-to-day transactions. These run sections are recorded in the double-entry accounting system. Each transaction has two sides, debit and credit sides equally. These accounting golden rules assist organizations maintain consistency and uniformity when it comes to conversational data and storing this data.
Accounting golden rules apply to three kinds of accounts, personal accounts, real accounts, and nominal accounts. This account has data related to liability and assets real accounts are carried forward and do not close at the end of the year. Personal accounts are personal depositories for companies, individuals, and other associations. The nominal account records all gains, income, losses, and expenses.
The First Rule Is To Credit What Goes Out And Debit What Comes In
This golden rule in accounting applies to real accounts where tangible assets such as buildings, machinery, and land furniture sector are taken into account. Their account of the business needs to be debited if the business acquires something such as an asset. The account will be credited when a tangible asset leaves the business. You can also consult with accounting and bookkeeping firms in Dubai to discuss the first rule in detail. Here are some of the important points to remember for you.
Debit what comes in.
- Credit what goes out.
- Credit the giver.
- Debit the receiver.
These golden rules of accounting are the foundation of the double-entry bookkeeping system. The double-entry bookkeeping system is a way of recording financial transactions and this ensures that the accounting equation always balances.
Here are some of examples how these rules apply:
- If you receive $200 in cash, you will debit a cash account and credit the owner’s capital account.
- If you sell goods to a customer for $200 then you would debit the accounts receivable account.
- You will credit the cash account if you pay $100 for rent and you would debit the rent expense account.
The Second Rule Is To Credit The Giver And Debit The Receiver
The second golden rule of accounting is about personal accounts. When a legal or natural person makes a donation to a company it becomes an inflow. When the business receives something then the amount must be debited according to the second golden rule of accounting. The account must be credited when the business gives something. Companies in Dubai can surely help you apply these golden counting rules.
Here are some of the important points you should remember:
- Debit the receiver.
- This rule applies to personal accounts.
- Credit the giver.
- This rule helps to ensure that the accounting equation always balances.
- It is the opposite of the first rule of accounting.
The Third Rule Is To Debit All Expenses And Losses And Credit All Incomes And Gains
This account golden rule is eligible for nominal accounts. These nominal accounts may include gain, expense, loss, and revenue accounts. According to the third of accounting, the capital of the company is its liability. The company has a credit balance and to credit all the gains and incomes will increase the capital. However, capital reduces when losses and expenses are debited. Businesses can seek the advice of accounting firms in Dubai to get more guidance about the accounting golden rules.
Modern Rules Of Accounting
The traditional rules of counting depend on the double entry system of accounting, and they are based on three types of accounting as discussed above. However, the modern version of accounting rules has six times of Accounts. This classification makes the transactions click into these categories. These accounts include:
- liability
- Expense
- Asset
- Capital
- Revenue
- Withdrawal
How Can The Best Accounting And Bookkeeping Firms In Dubai Help You?
The golden rules of accounting can guide businesses on how they can record their transactions. You can outsource your accounting requirements to the best accounting firms in Dubai to ensure your transactions are reported accurately such as ebs.
Here are some of the reasons why ebs is considered one of the best accounting services in the UAE:
- Qualified and experienced team:
- Affordable prices
- Commitment to client satisfaction
Here are some of the services we offer:
- Accounting and bookkeeping
- Tax Compliance
- Payroll management
- Financial advisory
- VAT consultancy
- Business consulting
If you’re looking for an accounting firm in the UAE ebs is the best option. We have helped many clients grow their businesses and run their accounts smoothly. If you handle your accounting task there will not be any mistake in your books of Accounts.
ebs provides reliable accounting services in Dubai that can make a difference in your business. We have the best experience and expertise in the field of accounting and auditing. We can add value to your business as we have many companies to grow their business. ebs also helps companies meet key compliance with corporate tax, VAT, UBO, and AML. Hire us to grow your business and keep all your accounting records.