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Rules of Debit and Credit

Rules of Debit and Credit

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Published by Gaurav
it will give you a idea of Rules of Debit and Credit
better for bba mba students
it will give you a idea of Rules of Debit and Credit
better for bba mba students

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Published by: Gaurav on Nov 08, 2009
Copyright:Attribution Non-commercial


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Rules of Debit and Credit (Equation Based)
Dual aspect concept in accounting implies that every accountingtransaction would be expressed by a debit amount and an equaland opposite credit amount. Thus, the rule that for eachtransaction debit amount must equal the credit amount hasabsolutely no exception. The equality of debits and credits may be expressed in the form of an equation:Debit = CreditIn the previous article we discussed accounting equation:A-L = Pi.e., Assets-Liabilities = Proprietor's Funds or CapitalIf each account was to be considered in isolation it would makeno difference whether increases were recorded on the debit sideor on the credit side but since the accounts are inter-dependenttherefore a system of recording increases and decreases on thetwo sides had to be fixed. Traditionally or conventionallyincreases in asset accounts are recorded on the debit side whileincreases in liabilities and capital are recorded on the credit side.The above rule ensures that when account balances are totaledwill confirm to the accounting equation discussed above.It gives rise to the following rules: .1. Increases in asset accounts are debits, decreases are credits.2. Increases in liability accounts are credits, decreases are debits.3. Increases in Owner's equity accounts are credits, decreases aredebits.Total classes of accounts maintained by any business willinclude the accounts relating to expenses, losses, revenues and profits in addition to assets, liabilities and proprietor's funds.Rules of debit and credit regarding assets, liabilities and capital

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