Basic Book of Accounting - Journal - Recording Debit and credit in Accounting

Operators are required to maintain various books for keeping accounts relating to activities which are as under:

(I) Journal

(2) Ledger (must be explained in another article)

Magazine

To study the magazine, some relative terms, together with the accounting procedure must be studied, which are as follows:

The Account

Transactions involving cash receipts and cash payments affect the balance of cash. Receipts to increase the cash balance of payments and decrease the cash balance. Instead of increase or decrease the balance after each transaction you can put together all the increases and decreases in a column in another column all together and find a balance only when necessary. It will be much more convenient and time saving.

In accounting, the device called account is used for this purpose. The simple form of account is called a T account is shown below. Increases in cash were listed on the left side and decreases on the right side, the ending balance was determined by subtracting the total payments by the total of the left.

Debt and Credit Accounting

As shown in the form of account referred to above is divided into two parts: the left side is known as 'part of debt' and on the right side is known as 'side of the credit'.

Amounts entered on the debit side (left side) are called debts and credit amounts on the right), are called credits. 'For Debt' means to make someone on the left side of an account 'and' on credit 'means making an entry in the right side of an account.

Debt and Credit words have any meaning in accounting.

Abbreviation used for the charge is Dr. and Cr for credit.

Rules of debit and credit (Equation Based)

Concept of dual aspect in accounting implies that every accounting transaction would be expressed as the amount of debt and credit an amount equal and opposite. Therefore, the rule that for every debit transaction amount must be equal to the amount of the claim has absolutely no exception. The equality of debits and credits can be expressed in equation form:

Debit Credit =

In the previous article we discussed the budget equation:

A-L = P

ie, Assets-Liabilities = Owner of funds or capital

If each account was to be considered in isolation, it would make no difference whether the increases were recorded on the debit or credit side, but since the accounts are so interdependent a system for recording increases and decreases on both sides had to be fixed. Traditionally or conventionally increases in the balance sheets are recorded on the debit side, while increases in liabilities and assets are recorded on the credit side. The above rule ensures that when the account balances are added together confirm the accounting equation above.

It gives rise to the following rules:.

1. Increases in capital accounts are debts, decreases are credits.

2. Increases in liability accounts are loans, debt declines.

3. Increase in shareholders are private loans, debt declines.

Total classes of accounts by any business include the accounts of the expenses, losses, revenues and profits in addition to assets, liabilities and fund holder. Rules of debit and credit regarding assets, liabilities and capital have been mentioned above and the rules for expenses and losses / profits and revenues can be derived from it.

4. Increase in expenses / loss accounts are debts.

Since the expenses and losses suffered as incurred and lead to the reduction of capital and equity owners are ecreases accounts payables, and increases in costs and loss accounts are debts.

5. Increased revenue / profits are accounts receivables.

Since revenues and profits earned when the capital will increase and the increase in equity, the shipowner are credits, thus increasing revenues and profits are accounts receivables.

The rules of debit and credit discussed above are based on technical accounting equation. Traditional rules of debit and credit are based on the classification of accounts. These rules, in practice, give the same
results and work the same way. These simply stale position in a different way .......