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Gold bill format for Accounting

hi everyone welcome back to sahab Academy today in this video we are going to understand three golden rules of accounting which is really simple and straightforward we use these rules to pass the general entries to prepare the ledger accounts to do the trial balance and the entire accounting is based on this isn't it we have to know properly what are rules of debit and Credit Now you all know there are two different rules of debit and credit right first we have these traditional approach that is golden rules of accounting okay and then we have modern approach as well which is based on accounting equation all right so what I used to do and I always do is that I do not prefer golden rules of accounting okay in all of my videos in all the chapter which I have taught and personally also I just prefer modern rules of debit and credit which says that there are only six category of items in accounting draw drawings expense asset liability equity revenue yes these two groups we have one group has debit balance and another group has credit balance to increase them you have to see what kind of balance they have asset has debit balance to increase we have to debit and to decrease we have to credit on the other hand let just say liability which has credit balance to increase it you'll have to credit and to decrease you have to debit right this is called as modern rules of debit and credit and you know this is really simple and straightforward and it's easier actually but now some of the people don't like this modern rules of debit and credit they prefer golden rules of accounting right and you know to be proper accountant you have to know both the things really okay you have to know modern rules of debit and credit as well as golden rules of accounting okay then only you will be able to pass the interviews and you will have a what do you say overall approach okay so that is why we have to cover golden rules of accounting as well so let's start let's understand what are these golden rules of accounting it's really simple and straightforward let's begin now see here to understand the golden rules of accounting first you need to know the traditional classification of accounts then only you will be able to apply the golden rules to pass the general entries and everything okay see the golden rules of accounting are really simple see personal account category real account category nominal account category right for each of the category you have a rule for personal account debit the receiver credit The Giver for real accounts debit what comes in credit what goes out for nominal accounts debit all expenses and losses and credit all incomes and gains okay these are the rules of accounting yeah golden rules but you cannot just pass these rules whatever transaction happens in your business what you have to do first you have to understand in which category it is falling see we are following double entry system right one account will be credited and one account will be debited at least that's what happens right so two accounts will be there you will get to know which two accounts are involved in a transaction you have to know now in which category they fall in which category they fall then only you'll be able to apply the rules that's the thing fine so to understand the traditional classification and the concept of these categories is very important so let's just do that first okay then we'll see an example and you will understand how to pass the general entries based on Golden rules of accounting okay so see here first we have personal accounts category right in this category we take all the accounts which relate to persons fine so see here in this also we have subcategory but don't worry for all the subcategory we have only one rule only debit the receiver credit The Giver see here the subcategories are first natural persons such as us humans Sonia Rohan Rohit shivraj okay yeah persons simple yeah if Sonia is receiving money then you will have to debit yeah debit the receiver if you know shivaraj is losing money or giving money then you'll have to credit right that's the rule then we have artificial persons now what are these artificial persons artificial persons are the entities that are created by law such as Banks SBI HDFC okay kotak bank right wio company infosis company joint stock companies also come under this uh sports club right and then Cooperative Society yeah all these are what artificial person your school or college is also what a registered entity right a business a company so that will come under this artificial person your bank account will also be a personal account in this golden rules okay it will be personal account is that clear okay and then representative personal account we have now what is this account which represent a certain person or group of person is called as what representative personal account let's take an example to understand let's just say you have a shop in that shop you know five employees are working okay now at the end of the month let's just say you haven't paid their salary but in accounting ing to the acral concept you have to record the salary right so when you will record the salary will you what do you say use the name of the employee you know whatever the name is Ram sham whatever five different uh people are there right no what you will do is you will group all their salary yeah let's just say you are paying 10,000 rupees to everyone okay so that's 50,000 right so you will club that salary into one account called as outstanding salary account yeah you will pass an entry salary account debit expense you will record right 50,000 and the credit will be what credit credit will be outstanding salary account yeah five different people have been clubbed under one account that one outstanding salary account is a representative of five different people right that's the thing okay representative personal account is that clear let just say you have uh a flat right and you haven't paid the rent let just say you haven't paid the rent of your office right so it's payable to your landlord right instead of taking the landlord name what you're doing is you are taking uh rent outstanding account you haven't paid the rent rent has become payable you have to pay at the end of the month you haven't paid it but still you have to record ing to your acral concept so you will use the account called as outstanding rent account right rent is an expense to that expense account you are adding what you're adding prefix before the word you are adding outstanding word is that okay so that becomes representative personal account yeah it represent the rent that is outstanding to the landlord it's a representative personal account is it clear okay so there are many examples of this don't worry okay you will understand when we'll see more examples of this okay see a prepaid Insurance acred interest account income received in advance and understand the most important is capital account and drawings account these are what representative personal account because capital is of owner and when drawings are made at that time also what happens capital of the owner reduces right so drawings are also what representative personal account because they represent the owner is that clear so Capital account and drawings account will be representative personal account fine okay so you understood personal accounts category now right three different subcategories we have you understood what all comes under that and you know the rule debit the receiver credit The Giver okay that's the thing is that clear okay fine moving on then we have real accounts category now what is this real account category it's really simple accounts which relate to tangible or intangible assets of the business right those type of accounts will come under this category real accounts category example first let's understand what are tangible and intangible assets see here tangible assets are the asset which you can touch feel and see and they have a physical existence such as for example land account building account cash account stock account yeah your inventory Goods Investments plant and Machinery Furniture computer all these are what tangible assets fine and then there are intangible assets which are opposite to this they do not have physical existence but you have a benefit from them and you cannot touch them see them feel them okay but they exist okay they provide benefit to your business fine yes so examples are Goodwill trademarks patents licenses and franchise rights Etc these are what intangible assets they will fall under real accounts category now what is the rule of real accounts it's really simple debit what comes in credit what goes out suppose you have purchased a land you have got the land so you have to debit that suppose you have sold your inventory so you will have to credit your inventory yeah it has gone out let just say you have purchased Furniture you have to debit the furniture because it's coming in is that clear debit what comes in credit what goes out is it clear real accounts rule fine debit what comes in credit what goes out and then we have the last category that is nominal accounts now what are these nominal accounts see it's really simple accounts which relate to expenses losses gains and revenue are what nominal accounts example it's really simple salary account rent paid purchases account sales account down commission paid electricity paid yeah commission received uh royalty received rent received yeah all incomes and expenses will come under nominal accounts now you have to understand and wonder this why why is it called nominal accounts why is that so because understand expense and incomes accounts are not carried forward to the next year no whatever you know transactions will happen and whatever balance will be there in these accounts that balance will be finished it will be taken to profit and loss account okay whatever balance you have in this it will hit profit and loss account and over there what we are going to do is we going to calculate the profit or loss that is made in the current year right so that is why in the current year whatever expenses and incomes have happened whatever balance is there all that will be finished yeah it will be transferred to profit and loss account fine the balance will be reset it will become zero in the next year you have to again reopen new expenses and incomes account is that clear so these expenses and incomes are temporary in nature in accounting yeah at the end of the year you finish off all the expense and incomes account it's temporary in nature so that's why this word has come nominal nominal means kind of like temporary is that clear okay so you understood the nominal accounts now what is the rule of nominal accounts rule is really simple debit all expenses and losses and credit all incomes and gains for example let just say you have paid rent debit rent let just say you have paid electricity bill debit electricity account let just say you have paid uh salary debit salary account let just say you have received rent from any extra room that you have rented out you have received rent so what you have to do you have to credit credit all incomes and gains let just say you have received royalty if you have received royalty then you have to credit that if you have received commission you have to credit that why why why because it's your income is that clear okay let just say you have sold some shares and you have made profit that profit is your gain that you have to credit is that clear let just say you have sold some other instrument like just say debentures or something and you have made a loss so that loss you will have to debit okay all that comes under nominal accounts all expenses and incomes account is that clear so these were the three different golden rules of accounting and the categories also you understood now let's just go to a practical example and let's just see how it will be applied over there with the journal entries okay following the double entry system is that clear okay so let's go over there so this was the concept of you know the categories that we have traditional classification of accounts fine but one small thing see here uh in nominal accounts okay let's just say we talking about salary now salary word is there now to this salary word if you add a word before this right which we call as as prefix let just say you're adding outstanding outstanding salary then it no longer is a nominal account it will become a representative personal account outstanding salary same with you know rent now to this rent if you add suffix yeah a word after this rent paid in advance then this becomes what this becomes representative uh personal account okay prepaid rent or rent paid in advance something like that or rent received in advance rent rent is there rent received in advance if that's the case then this is what suffix right rent word is there you have added a suffix then it's no longer a nominal account it has become representative personal account is that clear so that was the last thing that you had to understand okay now fine we are you know fully over with the concept let's just go to the Practical example now see here we have the question let's understand how we'll pass the general entries based on the golden rules of debit and credit see here from the following information State the nature of account and state which account will be debited and which will be credited okay we'll do that let's start with the first transaction started business with a capital of 50 lakhs 50 lakhs means 5 million yeah you all know that so how are we going to pass the general entry for this transaction or we can also say double entry okay double entry General entry is the same thing and you all know we are following double entry system in accounting right so in each of the transaction at least two accounts will be involved One account have to be debited and another account have to be credited right that's what happens so tell me which two accounts are involved over here you will say see we see the word Capital over here so obviously capital account is involved and the other is money right 50 lakhs 5 million money is involved so we can say bank account right it's such a huge amount it can't be in cash it will be in Bank okay so what has happened the owner has provided Capital over here right so two accounts are involved you're saying so see here started business with capital of 50 lakhs bank account is involved Capital account is involved now you need to understand in which category these two accounts are falling in okay let's talk about bank account is Bank an expense or income no it's not it's definitely not an expense or income right so it cannot fall under nominal account category yes clear and it's also not tangible and intangible asset okay it's not okay so it cannot fall under real account category also it has to fall under personal accounts category why is that so because understand bank account is related with the artificial person I told you now SBI Bank HDFC Bank yeah all these are what artificial persons yeah they are entities registered under the law right banking companies and the bank account is related with them yes so it's a personal account so this rule will be applicable on the bank account now let's talk about Capital account okay which type of account is the capital account Capital account represents the owner's money isn't it so capital account will be what personal account is that clear you all know what is personal account any account which relate to persons yeah capital account relate to persons simple capital is not expense or income it can't be nominal and it can't be real accounts also it is not asset at all capital account is that clear okay so it's both are personal accounts so for both the accounts we have to use this rule so how we are going to use in this transaction what happened tell me in this transaction owner has brought money into the business right but he hasn't brought cash he deposited the money in the bank account so Bank received the money debit the receiver Bank received the money is that clear so you have have to debit the bank account who gave this money from where the money came money came from the owner right it's Capital right so you know owner has given this money and here owner is represented in form of an account which is called as capital account okay is that clear so capital account has to be credited okay owner has given the money credit The Giver we can't credit the owner's name we have to credit the capital account that's his representative personal account is it clear absolutely clear so both are personal account yeah we have to debit the bank account and credit the capital account this is how we are going to pass the general entry bank account debit to Capital account is it clear simple and straightforward moving on second transaction wages and salaries paid 50,000 okay now in this transaction what is happening wages and salaries have been paid okay so see here wages and salaries have been paid so you will take wages and salaries fine and and then Bank yeah these two accounts are involved over here yeah easily you can understand fine if they would have given you two different amounts over here then you could have understood one is Wages another one is salaries but here they saying wages and salaries so it's the same thing only so only one account is there over here wages and salaries and bank account now in which category does wages and salaries fall wages and salaries are not personal account yeah they are not natural persons neither uh the artificial person nor representative personal okay it's not personal account it can't be real account as well because it's not asset it is nominal because it's expense isn't it in Hindi we say it's kcha right it's nominal account is that clear so it will be nominal account and you know how bank account is personal account yeah you have already seen the reason so here how you will apply the rule what do you do with expenses debit all expenses so you will debit the salaries account wages or salaries account debit okay and you will credit the bank account why is that so why is that so on bank account personal rule is applicable right it's personal account so what is Bank doing over here bank is giving the money this money has been given through bank so bank is giving the money isn't it if you see it like that bank is giving the money so credit The Giver okay this rule is applicable so bank account will be credited is that clear simple now the third transaction see here rent received now which two accounts are involved over here rent received obviously rent is involved right and then the second account which is involved is money right and money has been received in Bank yeah here we are not talking about cash if they say cash specifically then only we'll think it's cash but here we have huge amount so we will think it's Bank only so second account is Bank these two accounts are involved now tell me rent received is expense or income rent received means it's income right so what do we do with incomes we credit all incomes and gains income and account falls under nominal account and this rule is applicable credit all income so we will credit rent received account okay and the other account bank account bank account is a personal account so money has been received in our bank account so bank has received the money so we'll have to debit the receiver bank account will be debited is it clear see here rent received bank and rent these two accounts are involved bank is personal rent is nominal yeah rent received okay this is not just rent rent received rent received means it's income you credit all the income okay so rent account will be credited and bank account will be debited because bank has received in bank account the money is received is that clear fine understood the next transaction purchase Goods on credit 9 lakhs okay on credit they are saying you haven't paid the money so tell me which two accounts are involved over here perchase Goods means purchase account is involved over here now what is purchases purchases is an expense account understand that okay it's an expense account what do we do with expenses in which category it falls it falls under nominal accounts category we debit all expenses so purchase account will always be debited remember this Okay purchase account will always be debited okay and then what's the second account second account is the Creditor account we have purchased the goods from our supplier we don't know the name of the supplier so we'll say creditor account to whom we have to pay money okay we can also say payables is that clear so see Purchase made on credit purchase account and creditor account these two accounts are involved over here purchase account is nominal expense will debit the purchase account simple creditor means our supplier supplier is a person or if he's not a person let just say it's a company or something then also it's a person it's an artificial person right so he will fall under personal account category only okay and what he has done what he has done he has given us the goods right we have purchased the goods from him he has given the goods right so he's The Giver so credit The Giver personal account rule right credit The Giver he's The Giver of the goods so purchase account debit to credit our account is it clear simple and straightforward last transaction sold goods for 86,000 and received payment in check okay we have made sales but we haven't received cash we have received received in form of check so check means we'll use bank account is that clear okay that means we will receive money in our bank account isn't it yes so which two accounts are involved over here uh bank account and sales account now what is sales sales is income understand sales is income income means nominal account category credit all income right so sales account will be credited what will be debited bank account bank account will be debited why is that so because the money will be received in our bank we have got the check we will cash the check okay yeah we'll just uh you know present the check to the bank and then the check will be cleared hopefully and the money will be received in the you know bank account is that clear so bank will be the receiver bank is the personal account and you know we'll receive the money in the bank account so bank will be the receiver is that clear see here goods sold and payment received in Chuck two accounts are involved bank and sales account bank is personal sales is nominal yeah Sal income so you'll have to credit that okay and then Bank bank is the receiver bank has received the money right so bank account has to be debited is that clear simple and straightforward okay this was the Practical example which we solved ing to the golden rules of debit and credit okay really simple and straightforward so that's all for this video I hope you have understood the golden rules of debit and credit with perfect clarity if you have any doubts comment down below or you can just you know take screenshots or whatever questions you have have just asked through the Instagram as well okay so that's it for this video see you in the next video bye