Golden Rules of accounting

Golden Rules of accounting (Financial Accounting).
Difference Between Single Entry System and Double Entry System

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What do you mean by golden rule of accounting? What is the
difference between double entry system and single-entry system in
accounting?

Golden Rules of Accounting
Definition: In Double entry system, due to its dual aspect, every transaction affects two accounts,
one of which is debited and other is credited these rules are called as Golden Rules of Accounting.
1. Personal Account
Personal account relates to persons with whom a business keeps dealings. A person called be a natural
person or a legal person.
The Golden Rule for Personal Account is, “Debit the Receiver and Credit the Giver.”
2. Real Account
Real account relates to property which may either come into the business or go from business. If any
property or goods comes into the business, account of that property or goods is to be debited and if
any property or goods goes out from the business account of that property or goods is to be credited
in the books of business.
The Golden Rule for Real Account is, “Debit What Comes in and Credit What Goes out.”
3. Nominal Account
Nominal account is an account that relates to business expenses, loss, income and gains. If business
incurs expense to manage and run business, account of that expense is to be debited and when a
business earns income by rendering services or hiring business assets, an account of that income is to
be credited in the books of business.
The Golden Rule for Nominal Account is, “Debit All Expenses and Loss and Credit all Income and
Gains.”

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Difference between Double Entry System and Single-Entry
System:

Single entry system of bookkeeping, is economical but at the same time it is unscientific
because it does not record all the transactions rather only a few ones are tracked, and some are
recorded partially. On the other hand, Double entry system of bookkeeping is based on
fundamental principles of accounting and so it records every aspect of the transaction.
The following are the points of difference between single entry system and double entry
system:
I. Both the aspects of a transaction are
recorded in it. So complete analysis of a
transaction is possible.
I. For some transactions both the aspects
are recorded, while for some other
transactions only one aspect is
considered. Again, some transactions
are not recorded at all. Thus, complete
analysis of a transaction is not always
possible.
II. All the difference classes of accounts -
assets a/c, liability a/c, capital a/c,
expense a/c and revenue a/c - are
maintained.
II. Only cash accounts and personal
accounts are maintained.
III. It is possible to verify the arithmetical
accuracy of books through trial balance.
III. As under this system both the aspects of
all transactions are not recorded, it is not
possible to prepare trial balance and
thereby verify arithmetical accuracy of
books of account.
IV. All the necessary information is
available from this system at any time.
IV. As no detailed record is maintained in
respect of all transactions full
information is not available from the
books of account.
V. It is easier to detect mistakes and
deflections under this system.
V. Mistakes and deflections cannot be
detected easily under this system.
VI. This system is based on scientific
method
VI. It does not follow any scientific rules.
VII. Accounting is complex and costly under
this system
VII. Accounting is less complex and less
costly under this system.

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VIII. This system requires men with special
knowledge.
VIII. Men with common knowledge will do
in this case.
IX. In the first stage each transaction is
recorded in a book named "journal" and
therefore it is posted in another book
named "ledger" in the second stage.
IX. There is no rule here as such.
X. Since accounting under this system
requires many employees, it may not be
possible to maintain secrecy.
X. Here secrecy can be maintained, since
only a few persons are sufficient for
performing accounting job.