Accounting is often called the language of business, and at its core, it’s guided by a set of universal principles known as the “Golden Rules of Accounting.” Whether you’re a small business owner in Nepal or a student learning the basics, these rules form the foundation for accurate financial record-keeping.

1. The Three Golden Rules of Accounting

There are three fundamental rules that apply depending on the type of account involved:

Rule 1: Debit the Receiver, Credit the Giver (Personal Accounts)

When a person or entity gives something to your business, they are the “giver,” and you credit them. The one who receives value is debited. This rule applies to personal accounts, which deal with individuals, companies, and organizations.

Example: If your business borrows money from a friend, you credit your friend’s account and debit your bank account.

Rule 2: Debit What Comes In, Credit What Goes Out (Real Accounts)

Real accounts relate to tangible and intangible assets — things you own. When something comes into your business (asset acquisition), debit it; when it goes out, credit it.

Example: If you buy furniture for the office, you debit the furniture account and credit cash or bank.

Rule 3: Debit All Expenses and Losses, Credit All Incomes and Gains (Nominal Accounts)

Nominal accounts record expenses, losses, incomes, and gains. Expenses and losses are always debited; incomes and gains are always credited.

Example: When you pay rent, you debit the rent expense account and credit cash.

2. Understanding the Types of Accounts

• Personal Accounts: Related to persons or organizations.

• Real Accounts: Related to assets and properties.

• Nominal Accounts: Related to expenses, losses, incomes, and gains.

Knowing which type of account a transaction falls under is key to applying the correct golden rule.

3. Why These Rules Matter

• Accuracy: They ensure every transaction is recorded correctly.

• Transparency: They help in maintaining clear and understandable financial statements.

• Compliance: Following these rules keeps records aligned with accepted accounting standards.

• Decision Making: Accurate records enable better financial analysis and planning.

4. Applying the Golden Rules in Modern Accounting Software

Today, most businesses in Nepal use accounting software to automate record-keeping. The golden rules are built into the software’s logic, so even if you don’t manually enter debits and credits, the system applies them in the background.

However, understanding these rules is still important because it:

• Helps you interpret reports correctly.

• Makes troubleshooting errors easier.

• Improves communication with accountants and auditors.

If You’re Still Confused About Accounting Rules

If you still find these rules tricky or time-consuming to apply, switching to Oneflow Accounting Software can make your life much easier. Oneflow automatically applies all the golden rules of accounting in the background, so you don’t need to worry about debits and credits. It’s designed for non-accountant users and small business owners in Nepal, making accounting seamless, accurate, and stress-free.

Final Thoughts

The golden rules of accounting are timeless. Whether you use traditional ledgers or modern tools like Oneflow, these principles ensure that your financial records remain accurate, compliant, and useful for making informed business decisions.