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The financial accounting is all about Debits and Credit. Every Debit has an equal Credit. We use rules of Debit and Credit in double entry system, which are as follows:
> Increase in an Assets always Debit, Decrease in Assets always Credit
> Increase in Liablities always Creidt, Decrease in Liablities always Debit
> Increase in expenses always Debit, Decrease in Expenses always Credit
> Increase in Incomes always Credit, Decrease in Incomes always Debit
Financial transaction with two parties, one debtor and the other creditor equal in values
Each transaction affects at least two accounts. One is debited, the other is credited. I explain it in detail in my book Accounting for Beginners, available from Amazon.
Double entry system mean every business transaction has two effect one is debit and other is credit. For example one company bought goods on cash , these means goods are debit which shows increase in asset and other reduce in asset in the form of cash , this reduction shows the credit in book keeping.
any transaction must contain the Cr. + Dr. and must in finally its to be equal in the following formula
Assets = Liabilities + O/E
At the heart of all accounting systems is the General Ledger (often called the 'GL' for short). ... Debits and Credits are at the heart of double-entry accounting principles,
The increase of Debit accounts is debit a decrease of it is credit
increase of credit accounts is credit and decrease of it is debit
1.Debit the Receiver, Credit the giver
2.Debit what comes in, Credit what goes out
3.Debit all expenses and losses, Credit all incomes and gains
Double entry system of accounting is based on the dual aspect concept. It includes two aspects, they are Debit aspects and Credit aspects.
There are three kinds of rules for double entry system.
1 Personal Accounts: Debit the Receiver, Credit the Giver
2 Real Accounts: Debit what comes in, Credit what goes out
3 Nominal Accounts: Debit the expenses and losses, Credit the incomes and gains
The first to refer to the method of double-entry theory was the Italian mathematician Luca Basioli, who provided a complete chapter of one of his books (Mathematics and Statistics) for accounting and among the subjects he dealt with (double-entry theory) Singular.
The double-entry theory is that each financial operation of the company must have two or more parties and that any of them will belong to one of the main doors (assets / liabilities / equity / income / expenses) and that these two parties (or more) will be affected by the increase or decrease As a result of this process and that any financial operation subject to the rules of indebtedness and creditors where each major item has an inherent nature (debtor or creditor) and the increase in the item is of the same nature (debtor or creditor), the decrease in it is the opposite nature (debtor or creditor) as follows : - assets (city in origin) ----> if increase (debtor) -----> shortage (creditor) - Liabilities (credit in the asset) ----> Increase (credit) -----> Shortfall (debit) - Equity (credit in the asset) ----> Increase (credit) --- Deficit (debit) - Expenses (debit in the original) ----> Increase (debit) ----> Decrease (debit) If the increase is (debit) ----> shortage (credit) and therefore if the main item of the transaction is identified, it is possible to prepare the accounting in accordance with the rules of indebtedness and credit mentioned above. For example: The amount of 2000 pounds in cash and the rest checks, and therefore the uncle is analyzed As follows: Fixed asset ----> Asset item (debit) ----> Increase ----> Debtors (the same as the nature of the item) -----> $ 5,000 g Cash ----> Asset item ( ) ----> Decrease ----> Credit (reverse of the nature of the item) -----> For the sum of 2000 g. Payment papers ----> Item Obligations (creditor) ----> Increase ----> Credit (The same nature of the item) -----> for the amount of 3000 g. Thus, the balance is balanced (debtor / creditor) and the measurement is done for any financial transaction, and there is no need to identify the debtor and the creditor by giving.
