Rules of Debit and Credit
Arjun EP
According to double entry system of book-keeping, every financial transaction has two sides.
They are debit and credit.
It means when a financial transaction occurs, there will be two affects.
Debit means decrease in owner’s equity and credit means increase in owner’s equity.
For the same reason:
Increase in assets means debit but decrease in assets means credit.
Increase in liabilities means credit but decrease in liabilities means debit.
Under the double entry system of bookkeeping, there are only three accounts.
They are personal account, real account and nominal account
|
In personal account: |
In real account: |
In nominal account: |
|||
|
Receiver Giver |
Dr Cr |
What comes in What goes out |
Dr Cr |
Expenses or loss Income or profit |
Dr Cr |
PERSONAL ACCOUNT
|
In personal account: |
|
Increase or Decrease |
||||
|
Receiver |
Dr |
|
Increase debtor |
Dr |
Increase creditor |
Cr |
|
Giver |
Cr |
|
Decrease debtor |
Cr |
Decrease creditor |
Dr |
REAL ACCOUNT
|
In real account: |
|
Increase or Decrease |
||||
|
Comes in |
Dr |
|
Increase asset |
Dr |
Increase liability |
Cr |
|
Goes out |
Cr |
|
Decrease asset |
Cr |
Decrease liability |
Dr |
NOMINAL ACCOUNT
|
In nominal account: |
|
Increase or Decrease |
||||
|
Expense or loss |
Dr |
|
Increase expense |
Dr |
Increase income |
Cr |
|
Income or profit |
Cr |
|
Decrease expense |
Cr |
Decrease income |
Dr |
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු =
Example:
January 2: Manoj started business with cash Rs 200,000.
Here,
Cash is real account. Cash comes in business. It increases asset; it is debited.
Manoj is personal account. He gives money to business; he is credited.
Journal Entry
|
Date |
Particulars |
LF |
Amount Dr |
Amount Cr |
|
Jan, 2 |
Cash account Dr To Manoj’s capital account (Being- business started with cash) |
|
200,000
|
200,000
|
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