Learn Accounting Basics - Rules of Debit & Credit & More

 Accounting is the process of recording, summarizing, analysing and reporting financial transactions of a business.

It is done in accounting softwares such as Tally Prime or others.

An accountant maintains day to day business transactions on accounting software and also maintain physical records of these transactions i.e., sales files, purchases files, bank statements, etc.

Accounting transactions are recorded in Accounting Voucher by debiting and crediting Ledgers.

Example:

Purchases A/c ............. Dr.  20000                    [debit]

To Mr. Ram                              20000        [credit]

Accounting Voucher here is : Purchases 

Purchases A/c & Mr. Ram is: Accounting Ledgers

This is called journal entry.

In any accounting voucher total amount of ledgers Debited is same as total amount of ledgers Credited.

So, let's learn the rules of Debit & Credit in Accounting.


 Rules of Debit & Credit in Accounting

Let's learn when we debit and credit ledgers to record accounting transactions.


Debit is used in following conditions:

(i) When Assets increases

(ii) When Liability decreases

(iii) When Expenditure increases

(iv) When Income decreases

(v) When Profit decreases

(vi) When Loss Increases


Credit is used in following conditions:

(i) When Assets decrease

(ii) When Liability increases

(iii) When Expenditure decreases

(iv) When Income increases

(v) When Profit increases

(vi) When Loss decreases


Accounting entry for goods purchased from supplier will be:

Purchases A/c ............. Dr. 20000 [debit]

To Mr. Ram               20000           [credit]

In above example, goods are purchased which is our Asset and which increases so purchase account it is debited. Mr. Ram is our creditor which is our liability and which increases, so Mr. Ram is credited


After learning these above conditions for debit and credit you can do any entry in accounting voucher.

Learn how to record purchases in tally prime: (link below)

https://youtu.be/szou8xUysvc

Learn how to record sales in tally prime: (link below)

https://youtu.be/MxmlOtF6hQw

After making all the accounting entries in various Accounting Vouchers,  Trial Balance, Profit and Loss A/c and Balance Sheet of business entity is made.

 Learn what is Profit and Loss account & Balance Sheet in tally prime: (link below)

https://youtu.be/LF6EMIFm1jk

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