RULES OF DEBIT AND

CREDIT
“The Golden Rule of Accounting”
 RULES OF DEBIT AND
CREDIT
“The Golden Rule of Accounting”
Debit = Credit
 Debit = Credit

Value Received = Value Parted With

NORMAL BALANCES

ACCOUNTS NORMAL BALANCES

Assets Debit
Liabilities Credit
Equity Credit
Income/Revenue Credit
Expenses Debit

It should be noted that any increase effect on the accounts should be applied to
their normal balances, otherwise not.

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 NORMAL BALANCES PRACTICE
Instruction: Indicate whether the normal balance of the account is debit or credit, and whether the increase
or decrease of the said account should debit or credit.

Example:

PARTICULARS NORMAL BALANCE CHANGE (DEBIT/CREDIT)

Cash decrease by 10,000 Debit Credit

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 NORMAL BALANCES PRACTICE
Instruction: Indicate whether the normal balance of the account is debit or credit, and whether the increase
or decrease of the said account should debit or credit.

PARTICULARS NORMAL BALANCE CHANGE

(DEBIT/CREDIT)
1. Cash increased by P7,000 Debit Debit
2. Transportation expense increased by P2,000 Debit Debit
3. Accounts Receivable decrease by P23,000 Debit Credit
4. Accounts Payable increase by P18,000 Credit Credit
5. Accounts Payable decreased by P5,000 Credit Debit
6. Furniture acquired for P17,000 Debit Debit
7. Salaries and Wages increase by P10,000 Debit Debit
8. Loans Payable in bank was paid in full Credit Debit
9. Equipment sold for P50,000 Debit Credit
10. Accounts Receivable was collected in full Debit Credit 7
 JOURNALIZING

Journalizing transactions is the process of keeping a record of all your business transactions,
tracking them in chronological order, and generally includes the date, the account you’re debiting
or crediting and a brief description of the transaction that occurred.

Journalizing transactions is the crucial first step in the accounting cycle. Journal entries serve
as the building blocks for your financial records, so it’s important to stay on top of them. All your
business transactions, including payments from clients and purchases you make for your
business, are journalized.

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JOURNALIZING SAMPLE EXERCISES

ABC Hotel completed the following transactions during the period of September 2021:

1. The owner purchased a Laundry Equipment with a value of P1,200,000.

2. Paid salaries for its employees, P120,000
3. Earned a Room Accommodation Income of P995,000.
4. Purchase Room Hotel Supplies for P10,000, on credit. Hotel supplies are directly charge to expense
5. Purchase Laundry Supplies for cash, P5,000.
6. Purchase on credit an additional Rooms Furniture and Fixtures for P85,000.
7. Paid water and electricity for the month, P65,000. (They used Utilities Expense for this account)
8. Paid the transaction No. 4.
9. Bill the government customer for room accommodation of P186,000.
10. Collected the 50% of transaction No. 9.