The 3 Golden Rules of Accounting Explained with Examples
Published on: March 27, 2026
Table of Contents
The Golden Rules of Accounting are fundamental principles that govern how financial transactions are recorded. These rules are based on three types of accounts.
The three types of accounts are as follows:
- Real Account
- Personal Account
- Nominal Account
Every account/entry will fall into one of the above accounts.
A Real Account is a general ledger account relating to Assets (tangible & intangible) and Liabilities. These are accounts that don’t close at year-end and are carried forward.
An example of a Real Account is a Bank Account.
A Personal account is a General ledger account connected to all persons, like individuals, firms, and associations.
An example of a Personal Account is a Creditor Account.
A Nominal account is a General ledger account about all income, expenses, losses, and gains. These accounts are temporary and closed at the end of the financial year.
An example of a Nominal Account is a Salary Account.
GOLDEN RULES OF ACCOUNTING
The three golden rules of accounting are fundamental principles based on account types—Personal, Real, and Nominal—used to determine debits and credits.
These rules ensure accurate double-entry bookkeeping, maintain financial consistency, and simplify the process of recording transactions.
A step-by-step guide on how to record a transaction by applying the golden rules of accounting:-
- Identify the type of account – Determine whether the transaction involves a Real, Personal, or Nominal Account.
- Apply the relevant rule – Use the corresponding Golden Rule to record the transaction
- Ensure the balance – Match every debit with a corresponding credit entry to maintain balanced ledger books.
