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Rules of Debit Credit

Accounts track increases, decreases, and balances of items on financial statements. Accounting uses double-entry bookkeeping where every transaction has at least one debit and one credit affecting two accounts, and total debits equal total credits. The type of account determines if increases or decreases are recorded as debits or credits.

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60 views1 page

Rules of Debit Credit

Accounts track increases, decreases, and balances of items on financial statements. Accounting uses double-entry bookkeeping where every transaction has at least one debit and one credit affecting two accounts, and total debits equal total credits. The type of account determines if increases or decreases are recorded as debits or credits.

Uploaded by

Kelsey Sofia Rojas
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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THE ACCOUNT

The basic summary device of accounting is the account. A separate account is maintained for each item that appears
on the balance sheet (assets, liabilities and owner’s equity) and on the income statement (revenues and
expenses).
Thus, an account may be defined as a detailed record of the increases, decreases and balance of each item that
appears in an entity’s financial statement.

The simplest form of the account is known as the “T” account because of its similarity to the letter “T”. the account
has three parts as shown below:
ACCOUNT TITLE
LEFT SIDE OR DEBIT RIGHT SIDE OR CREDIT
SIDE SIDE

DEBITS AND CREDITS --- THE DOUBLE-ENTRY SYSTEM


Accounting is based on a double-entry system which means that the dual effects of a business transaction is
recorded.
 A debit side entry must have a corresponding credit side entry. For every transaction, there must be one or
more accounts debited and one or more accounts credited.
 Each transaction affects at least two accounts.
 The total debits for a transaction must always equal the total credits.
 An account is debited when an amount is entered on the left side of the account and credited when an
amount is entered on the right side.
 The abbreviations for debit and credit are Dr. and Cr., respectively.

The type of an account determines how increases and decreases in it are recorded.
 Increases in assets are recorded as debits while decreases in assets are recorded as credits.
 Conversely, decreases in liabilities and owner’s equity are recorded by debits; increases in liabilities and
owner’s equity are recorded by credit.

Book of Accounts
 The journal is a chronological record of all company’s transactions listed by date. It is often referred to as the
book of original entry.
 The recording of financial information into the journal is known as the process of journalizing.
 The journal typically displays the transaction’s date, account titles and explanations, references, and respective
amounts of corresponding accounts.

GENERAL JOURNAL Page:_______


Account Titles and Post.
Date DEBIT CREDIT
Explanation Ref
1
2
3

 After journalizing the business transactions in the journal, the company will now proceed to the process of
posting.
 The ledger is the grouping of all accounts of a company showing its respective outstanding balances. It is also
called the book of final entry of accounting transactions.
 The ledger contains all the asset, liability, and equity accounts of the company.

GENERAL LEDGER

Account: Account Num:


Post.
Date Description DEBIT CREDIT BALANCES
Ref

TOTAL:

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