The Golden Rules of Accounting and GSTIN
Accounting
Accounting provides an extensive system for quantifying and summarising business activities. It provides a means for interpreting and communicating critical financial information to the management and other stakeholders to facilitate transparent and sound financial decisions. Whether it is the management or financial form of accounting, its general outcome and profits rely heavily on it. So it would need to be a particular set of standards to be met. And these standards are presented globally, in the form of the golden rules of accounting.
Simply put, these are a set of similar, written, and unwritten bookkeeping rules that produce the most feasible outcomes in businesses where they are applied.
Let’s take a closer look into the golden rules of accounting:
Rule 1
Debit the receiver and credit the giver.
This falls into the handling of personal accounts. A personal account is a general ledger connected to individuals or organizations, for instance, a Creditor Account. If any amount is received from the account holder, it should be debited, and if an amount is given to the account holder, it should be credited when recording in your books.
Rule 2
Debit what comes in and credit what goes out.
This pertains to the handling of real or permanent accounts. A real account is a general ledger connected to particular assets or liabilities, for instance, a Vehicle Account. If an asset is purchased using money from the business, the asset account is debited, and the source-of-money account is credited in your books.
Rule 3
Debit expenses and losses, and credit income and gains.
The final rule pertains to the handling of nominal or temporary accounts. These accounts are closed at the end of each accounting period (per day/month/quarter etc.), for instance, a Sales Account. Nominal accounts are debited if the business incurs losses and is credited if it records an income in your books.
GSTIN
The Goods and Services Tax Identification Number (GSTIN, GST Number, or GST Registration Number) is a PAN-based code issued when allotting a registration certification. The GST number format consists of a 15-character alphanumeric string where the first two characters relay state code and the following ten characters are the holder’s PAN number. This GST Number format is common to all business entities or suppliers for tax payment and does not come with a cost to obtain.
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