Golden Rules of Accountancy Vs Ancillary Rules of Accountancy

Generally, You need to know the rules of debit and credit to enter the advanced journal entries (or) Journal entries.

GOLDEN RULES OF ACCOUNTANCY

The golden rules of accountancy describes to you which ledgers will effect under golden rules of accountancy. And the debit and Credit of ledger depends on purely on that transaction.
Here, I’m giving you the golden rules of accountancy.

S.NoNatureDebitCredit
1Personal Accountthe receiverthe giver
2Real AccountWhat Comes InWhat Goes Out
3Nominal AccountAll Expenses and LossesAll incomes and Gains
golden rules of accountancy

PERSONAL ACCOUNT:

Persons, Companies, Organizations categorizes in this account.
According to a personal account, Ledger can debit that who will be receiving. Ledger can be credited that who will give.
Example: Vijay received the amount in cash. Here, Vijay is earning money so that the Vijay account can debit according to the personal account. If Vijay gives the amount, then the ledger Vijay account will be credited according to the personal account.

REAL ACCOUNT

All assets are effect in Real account.
Examples for Assets: Cash, Bank Accounts, Machinery, Furniture, etc…..!
If asset value increases, it can be debited, and if the asset value decreases, it can be credited.
Example: Vijay is giving cash – Rs. 30000/-. Here Cash ledger balance will increase. So, It will be debited. We paid money to Vijay. Here, Cash ledger balance decreased. So it is credit—Vijay’s ledger effects to personal account.

NOMINAL ACCOUNT:

Expenses like Salaries, Wages, Travelling can be debits. Losses also debited. And incomes like commission received, interest received can be credited.

But GOLDEN RULES OF ACCOUNTANCY cannot give solution for advanced transactions.
For example:

1. Cash sales – Rs. 40000/-
Here, Cash value is increasing. So, according to Real Account, it will be affected in Debit. And Sales ledger can be in credit. But We unable to say, under which rule of account sales ledger credit. ; we cannot say. It is just credited. So flaws are there in golden rules of accountancy.

ANCILLARY RULES OF ACCOUNTANCY

So, ANCILLARY RULES of Accountancy gives you a permanent solution for regular journal entries and advanced journal entries.

Ancillary rules categorized into Six heads. They are

1. Assets:
Debit increases
Credit Decreases

2. Liabilities:
Debit decreases
Credit Increases

3. Purchase:
Debt Increases
Credit Decreases

4. Sales:
Debit Decreases
Credit Increases

5. Expenses
Debit increases
Credit decreases

6. Incomes:
Debit Decreases
Credit Increases

Now i’am going to compare golden rules and ancillary rules.

  1. Cash deposited into SBI – Rs. 50,000/-

    According to the Golden Rule:
    SBI A/c – Dr 50,000 (Real account – asset comes in )
    Cash A/c – Cr – 50,000 (Real account – Asset goes out)
    According to Ancillary Rule:
    SBI A/c – Dr (Asset increased)
    Cash A/c – Cr (Asset Decreased)
  2. Cash purchases – Rs. 20000/-
    According to the Golden Rule:
    Purchase A/c – Dr (Rule: We cannot say)
    Cash A/c – Dr (Real Account – Asset comes out)

    According to Ancillary rule:
    Purchase A/c – Dr (Purchase value increased)
    Cash a/c – Cr (Asset decreased)
  3. Purchase Returns – Rs. 1000/-
    According to the Golden Rule:
    Cash A/c – Dr (Real account – Asset comes in)
    Purchase A/c – Cr (Rule: We cannot say)

    According to Ancillary Rule:
    Cash A/c – Dr (Asset value increased)
    Purchase A/c – Cr (Purchase Value Decreased)

So, Ancillary rules of debit and credit give you a solution for any advanced transaction.

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