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    1 Debit and Credit in Accounting

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    mamakamilaikasi

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    1 Debit and Credit in Accounting

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    mamakamilaikasi
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    DOC 1 Debit and Credit in Accounting

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    13 views3 pages

    1 Debit and Credit in Accounting

    Uploaded by

    mamakamilaikasi

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
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    Debit and Credit in Accounting

    Every business transaction which can be measured in monetary terms finds a


    place in the accounting transactions of a firm. In order to record such
    transactions, a system of debit and credit has been devised, which records such
    events through two different accounts.

    The net effect of these accounting entries is the same in terms of quantity.
    However, by debiting and crediting two different accounts, the correct and apt
    accounting treatment can be depicted. In a ledger account, usually the debit
    column is on the left and the credit column is on the right.

     A debit is an accounting entry that either increases an asset or expense


    account. Or decreases a liability or equity account. It is positioned on the
    left in an accounting entry.
     A credit is an accounting entry that increases either a liability or equity
    account. Or decreases an asset or expense account. It is positioned on the
    right in an accounting entry.
    Whenever an accounting transaction happens, a minimum of two accounts is
    always impacted, with a debit entry being recorded against one account and a
    credit entry being recorded against another account. There is no upper limit to
    the number of accounts involved in a transaction but the minimum cannot be
    less than two accounts.

    The totals of the debits and credits for any transaction must always equal each
    other so that an accounting transaction is always said to be in balance. Thus, the
    use of debits and credits in a two column transaction recording format is the
    most essential of all controls over accounting accuracy. This is how debit and
    credit find their use.

    Browse more Topics under Recording Transactions

     Business Transaction and Source Document


     Books of Original Entry
     Posting from Journal and Cash Book
     Journal Proper and Balancing the Accounts
     Purchases (Journal) and Purchase Return Book
     Sales (Journal) Book and Sales Return Book
    Learn more about Sales Journal Book and Sales Return Book

    Rules for Debit and Credit

    The following are the rules of debit and credit which guide the system of
    accounts, they are known as the Golden Rules of accountancy:

     First: Debit what comes in, Credit what goes out.


     Second: Debit all expenses and losses, Credit all incomes and gains.
     Third: Debit the receiver, Credit the giver.
    Understand the concept of Business Transaction and Source Document here in
    detail.

    A debit and credit entry have a broad impact on different accounts. For example,
    in

     Asset accounts, a debit increases the balance and a credit decreases the
    balance.
     Liability accounts, a debit decreases the balance and a credit increases
    the balance.
     Equity accounts, a debit decreases the balance and a credit increases the
    balance.
     Revenue accounts, a debit decreases the balance and a credit increases
    the balance
    Get Accountancy Important Questions here
    Solved Question for You
    Question: Provide journal for the following transactions –

    a. Cash Sale
    b. Cash Purchase
    c. Repayment of loan
    Solution:

    1. Sale for cash


    Cash A/c – Dr.

    To Sale A/c

    2. Purchase of inventory from the supplier for cash


    Inventory A/c – Dr.

    To Cash A/c

    3. Repaying a loan
    Loan payable A/c – Dr.

    To cash A/c

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