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    Double Entry System and The Rules For Debit and Credit

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    rxcha.joseph
    The document discusses the double entry system of accounting. It describes that every transaction has two aspects - debit and credit. It then explains the features, advantages, and rules for debit and credit under the traditional and modern approaches.

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    Double Entry System and The Rules For Debit and Credit

    Uploaded by

    rxcha.joseph
    17 views3 pages
    The document discusses the double entry system of accounting. It describes that every transaction has two aspects - debit and credit. It then explains the features, advantages, and rules for debit and credit under the traditional and modern approaches.

    Original Description:

    accounting basics must for cbse class 11 and12

    Original Title

    DOUBLE ENTRY SYSTEM AND THE RULES FOR DEBIT AND CREDIT

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    The document discusses the double entry system of accounting. It describes that every transaction has two aspects - debit and credit. It then explains the features, advantages, and rules for debit and credit under the traditional and modern approaches.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    17 views3 pages

    Double Entry System and The Rules For Debit and Credit

    Uploaded by

    rxcha.joseph
    The document discusses the double entry system of accounting. It describes that every transaction has two aspects - debit and credit. It then explains the features, advantages, and rules for debit and credit under the traditional and modern approaches.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    You are on page 1of 3

    DOUBLE ENTRY SYSTEM AND THE RULES FOR DEBIT AND CREDIT.

    Every transaction contains two aspects. Debit aspect and Credit aspect. Recording of
    the two aspects at the same time is called Double Entry System of Accounting. This system
    of accounting is a scientific and complete system of accounting .

    FEATURES OF DOUBLE ENTRY SYSTEM.

    1. It maintains a complete record of each transaction.


    2. It recognises two-fold aspects of every transaction.
    3. In this system one aspect is debited and the other aspect is credited.
    4. The total of all debits equals to total of all credits. It helps to establish the
    arithmetical accuracy by preparing a statement called Trial Balance.

    ADVANTAGES OF THE DOUBLE ENTRY SYSTEM.

    1. It is a Scientific System
    2. It is the complete record of transactions
    3. The arithmetical accuracy of accounts can be found out.
    4. To find out the Profit or Loss.
    5. To ascertain Financial position of the firm.
    6. Full details for the control of the business.
    7. Comparative study is possible.
    8. Helps the users of accounting data in Decision-making.
    9. Frauds and Misappropriations can be located.
    10. This method of accounting will be accepted by the Tax Authorities, Banks, Creditors
    etc;-

    RULES FOR DEBIT AND CREDIT


    Under the Double Entry System of Accounting one Aspect or Account is to be debited and other
    Aspect or Account is to be credited from every transaction. Debit means to write on the left side of
    an account and Credit means to write on the right side of an account. Also there are some rules to
    find out the debit account and credit account. To find out the debit and credit there are two types of
    Rules namely ‘TRADITIONAL APPROACH AND MODERN APPROACH’.

    1. TRADITIONAL APPROACH
    This method is also called English Approach. Under this method the Accounts are mainly
    classified in to two. That is Personal Account and Impersonal Account.

    PERSONAL ACCOUNTS.

    This is the account of Persons and the Firms or Institutions. Eg;- Anil, Alpha Company ,State Bank of
    India etc:-The Personal account is classified in to three namely Natural Personal Account ,Artificial
    personal Account and Representative Personal Account. (Page-1}
    (a) Natural Personal Account .
    This account includes the name of the persons . eg:- Ram , Sojan etc:-
    (b) Artificial Personal Account.
    This account includes the name of the Firms and Institutions. Eg:- Canara Bank, Reliance
    Company etc:-
    (c) Representative Personal Account.
    These are accounts which represent a certain person or group of persons. These are
    the accounts of Expenses Payable , Expenses Paid in Advance, Income Receivable
    and income Received in Advance. Eg:- Rent Outstanding, Interest Accrued etc:-

    IMPERSONAL ACCOUNT.

    This account includes all accounts other than the personal account. This account is divided
    in to two. i.e. REAL ACCOUNT AND NOMINAL ACCOUNT.

    1. REAL ACCOUNT.
    It is the account of valuable items such as land and Building , Machinery, Motor Vehicles
    etc:-
    2. NOMINAL ACCOUNT.
    It is the account of Expenses, Loses, Incomes and Gains.eg:- Rent, Salary ,Interest
    etc:-

    RULES FOR DEBIT AND CREDIT.

    1. REAL ACCOUNT :- DEBIT WHAT COMES IN


    CREDIT WHAT GOES OUT
    2. PERSONAL ACCOUNT:- DEBIT THE RECEIVER
    CREDIT THE GIVER.
    3. NOMINAL ACCOUNT :- DEBIT THE EXPENSES AND LOSSES
    CREDIT THE INCOMES AND GAINS.

    MODERN APPROACH.

    This method is also called American method. Under this method the accounts are
    classified in to five categories :-1.Asset Accounts 2. Liability Accounts 3. Capital Accounts
    4. Revenue Accounts (Income and Gains Accounts) 5. Expenses and Losses Accounts.

    RULES UNDER MODERN METHOD.

    TYPES OF ACCOUNT ACCOUNTS TO BE DEBITED ACCOUNTS TO BE CREDITED


    1.ASSET ACCOUNTS INCREASE DECREASE
    2.LIABILITY ACCOUNTS DECREASE INCREASE
    3.CAPITAL ACCOUNTS DECREASE INCREASE
    4.REVENUE ACCOUNTS DECREASE INCREASE
    5.EXPENSE AND LOSSES A/C INCREASE DECREASE
    (Page-2)

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