What Are the 3 Fundamental Accounting Rules? Explained Simply

Learn the 3 key accounting rules: Debit what comes in, debit the receiver, and debit all expenses for accurate bookkeeping.

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The three fundamental accounting rules are: 1. Debit what comes in, and credit what goes out: This rule applies to asset accounts. When assets increase, they are debited, and when they decrease, they are credited. 2. Debit the receiver and credit the giver: This rule governs personal accounts. It means you debit the account of the person or entity receiving value and credit the account of the person or entity giving value. 3. Debit all expenses and losses, credit all incomes and gains: This rule pertains to expense and revenue accounts, ensuring that expenses and losses are always debited, while incomes and gains are credited.

FAQs & Answers

  1. What is the first fundamental accounting rule? The first accounting rule states: Debit what comes in and credit what goes out, which applies to asset accounts.
  2. How does the second accounting rule work? The second rule is to debit the receiver and credit the giver, which applies to personal accounts involving transactions between entities.
  3. What accounts are affected by the third accounting rule? The third rule debits all expenses and losses and credits all income and gains, affecting expense and revenue accounts.

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