What are the 3 basics of accounting?

What are the 3 basics of accounting?

Accounting is essential for any organisation in order to maintain day to day financial records. It helps to trace any kind of fraud or mistakes in the financial statements. Thus, it is extremely crucial to maintain your company accounts in proper order. That is why every small or large organisation appoint an expert accountant in Dubai to maintain the accounting process. It is highly beneficial for the company itself to keep the accounts in order. 

What Are Accounting Principles?  

While collecting data, keeping a balance sheet and maintaining accounts an accountant must follow certain rules. The rules are set to make the process systematic and free of errors. Also, every accountant follows these golden rules or principles all across the globe. So, it is a kind of universal rule to make the accounting system uniform all over the world.  

Accounting principles are a set of rules that you should follow while recording day to day transactions. It makes the accounting process accurate and similar. These basic guidelines help businesses store their data in a uniform format and present them in a proper structure. Thus a person can locate a piece of information in a designated place and it makes their job easier. Thereby, maintaining a systematic file helps them save a lot of time.  

Professional accounting firms do these jobs pretty easily and with efficiency. If you have to file taxes or VAT returns in Dubai you should contact professionals for the job.  

Key Points To Remember- 

  • Accounting rules refer to a set of guidelines That company needs to follow in order to maintain a record of systematic financial transactions.  
  • It is effective in making financial decisions for the company and its stakeholders. 
  •  By maintaining a systematic accounting the account of a company remains uniform and consistent. 
  • The traditional rule of accounting revolves around 3 main things, that is really personal and nominal accounts. 
  • However, modern accounting rules deal with 6 main types of accounts, namely asset liability revenue Expense capital and withdrawal.  

The Golden Rules Of Accounting- 

The Golden rules of accounting convert complex Bookkeeping regulations into a few simple principles. First of all, you have to ascertain the type of account- real, personal or nominal. Every account has its rules that need to be applied.  

Debit The Receiver And Credit The Giver 

This rule is applied in the case of personal accounts. According to this role when a person gives something to an organization or company, they belong to the credit list. The contrary situation is also true, when a person receives something from the company, he or she must in the debit list.  

 Debit What Comes In Credit What Goes Out 

This rule is applied in the case of real accounts. In real accounts, pieces of machinery, land, buildings and other assets are included. All these things have a debit balance by default. Therefore when you Debit what comes in you are actually adding to the existing account. This is the real process you need to follow in such cases. Similarly, when you sell tangible assets from the organization, you are actually reducing the account. 

 Debit All Expenses And Losses And Credit All Gains And Profits 

This rule is used in case the account is a nominal account. The capital of the organisation is considered a liability. So, it has a credit balance by default and when you credit all profits and gains, you increase the capital. Also, by debiting expenses and losses, you reduce the capital. This is what needs to be done for the entire financial system to stay in proper balance. 

The Bottom Line 

These guidelines help the user to understand the accounting system easily and make effective decision-making. You can treat your financial information according to the norms and it will be uniform with any other accounting patterns.

The uniformity of the accounting makes the information presentable, and easy to read and understand. Therefore any small mistakes or frauds can be easily identified and corrected. However, you should always hire a reliable and experienced accounting firm for your company.  

Accountant Dubai has expert accountants with years of experience in the field. They provide services such as VAT returns, bookkeeping and accounting, auditing etc.  


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