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  • In this session we are going to learn that every transaction has two effects i.e. Every

  • Debit must have a corresponding Credit effect & there are some rules of debit & credit for

  • personal, real & nominal accounts Introduction

  • In our previous session we have seen how all accounts are classified into real, personal

  • & nominal accounts. We also have an idea about the dual aspect

  • concept or the double entry system of accounting which states that every transaction has 2

  • equal effects. Without recording both the effects or dual effects in books of accounts

  • our record will be incomplete or imbalance & it will show a wrong status

  • . Lets go one step further and talk about what

  • are these two equal effects . one of these two effects is always a Debit and the other

  • effect is always a Credit So What are these terms debit and credit ?they

  • are just formal bookkeeping and accounting terms that have opposite meanings .These are

  • like the pillarsof accounting on which the entire accounting is based...

  • Now lets proceed further, A few days ago I was at my friend Peters grocery

  • store and was checking to see how is He keeping his records??

  • 1. Sold goods to Mr. Adam worth $500 on credIT here peter has credited Adams Account & debited

  • goods account 2. Purchased goods from Mr. Alfred worth $600

  • on credit here he has debited Mr. Alfreds Account & credited goods account

  • 3. Furniture Purchased worth $200 from Mr. Roy here peter has debited Roys account & credited

  • furniture account 4. Salary Paid to the Joy worth $100 here

  • peter has debited joys account & credited cash account

  • 5. Commission received from Mr. Philip worth $200 here peter has debited cash account & credited

  • commission account Here we have picked 5 random transactions

  • from Peters book and we are going to analyse each one of them. (pause 5 secs) (on screen

  • transactions with entries will appear) So the first transaction is

  • 1. Peter sold goods to Mr. Adam worth $500 on credit. & payment would be made in 15 days..

  • Peters entry: Adams a/c Debit

  • Goods a/c credit Now this is a sales transaction,

  • To analyze this , the Imp thing to do is to find out which are the two accounts that will

  • be affected as per the dual aspect, Here goods have been sold so the Sales a/c

  • will be affected & second would be Mr. Adams account as the goods are sold on credit,

  • Next step is to classify these accounts into Real, Nominal or Personal,

  • As we have discussed in our previous session, all the incomes come under the nominal a/c.

  • therefore Sales is a nominal account (revenue). Like this,

  • Sales Nominal Account Credit &The accounts which relates to a person comes

  • under Personal account so Adams a/cis personal a/c

  • (being a person) Now the question is which account should we

  • debit & which should we credit? So, whenever a person receives a benefit in

  • form of goods or cash , the account of the Person is debited, by the amount of the benefit

  • received In this case,

  • Mr. Adams account is debited since he is the receiver of goods (benefit received)

  • Here we can say that, So Person who is in debt (debtor) is debited

  • & The second a/c affected, sales a/c.. which

  • is nominal a/c.It is like a revenue all revenues , incomes, and gains increase the profit of

  • the business. And so we credit them. So like we had seen that every debit has an equal

  • and corresponding credit effect here we have one debit and one credit effect.

  • So the correct entry is.. Mr. Adams account -Dr & Sales account -Cr

  • So now we will check every transaction in this way

  • Lets look at the second transaction.(at dis time following transaction will appear)

  • peter Purchased goods from Mr. Alfred worth $600, on credit & payment would be made in

  • 20 days.. Now this is a purchase transactionAnd this

  • is Peters entry lets analyse itAlfreds A/c Debit

  • Goods A/c - Credit Here peter has debited Mr. Alfreds Account

  • & he has credited goods account 1. the 2 accounts affected ??

  • One is Mr. Alfred�s account (as the goods are purchased on credit & second is Purchase

  • account as the goods are purchased� 2.now here, Purchases comes under nominal

  • accounts (as it�s our expense) And Mr. Alfred -- personal account

  • 3. Now well come to the third step.. debit and credit

  • when a person gives benefit of goods or cash .. i.e the creditor his a/c iscredited, by

  • the amount of benefits given. So Mr. Alfreds account will be credited

  • So person who gives Credit .. creditor..is credited

  • The second a/c purchase a/c which is nominal a/c is An expense Now all expenses &losses

  • decreases the profit of the business. And hence they are debited.

  • Decrease profits debited increase profits credited Here one trick is The words debtor

  • & creditor itself is giving the answer i.e. DEBTOR (receiver of goods/services) = DEBIT

  • CREDITOR (giver of goods and services) = CREDIT Note that, only those purchase/sales transactions

  • where it is specifically mentioned that payment was in cash, is considered to be a cash transaction..

  • If cash is not mentioned it is assumed to be a credit transaction and so the debit or

  • credit effect will be given to the Partys name mentioned ..

  • Lets move on to the next transaction 3. Furniture Purchased worth $200 on cash from Mr. Roy

  • Lets see what peter has done Roys A/c Debit

  • Furniture A/c - Credit So here do you think Roy�s account should

  • be affected No, because this transaction is a cash transaction so, no party will be affected

  • So in this case , furniture & cash are the 2 accounts affected.. and as we know assets

  • will come under real account ..both are real okay

  • Now, whenever an asset comes into the business through its or receipt, asset account is debited.

  • So here we have purchased furniture so furniture will be debited, Conversely, whenever assets

  • goes out of the business through its sales or payment, asset account is credited & here

  • we have paid cash so it will get credited Now next is

  • 4. peter has paid salary to joy worth $100 Now here, the two accounts which are affected

  • aresalary a/c � & � cash a/c� Salary is Nominal account as its an expense

  • of the business So it will have debit effect right?..

  • & second is cash & it comes under real account as its an asset of the business..

  • Asset going out of the business ..so it will be credited. So second part is correct

  • All okay so far The last one

  • 5. Peter has received Commission from Mr. Philip worth $ 200

  • Peters entry Commission A/c Debit

  • Cash A/c - Credit Now here ,Peter debited commission account

  • Now lets analyze this transaction, Fist step which are the two accounts???

  • One is commission & second is cash account 2nd...is classification??

  • Commission will come under nominal account as its income of the business

  • Cash will come under real account as it is an asset

  • So here we will debit cash account as we have received cash/asset

  • & we will credit commission as this is the income of the business

  • With this we have finished checking Peters book & rectified it we have also come across

  • through what is debit & Credit.. So far we have learned logical understanding of debit

  • & credit effect now here are some rules of each type of account

  • So if we notice, So in first example we have debited the person

  • who is receiving the benefit (goods) & in second example we have credited the person

  • who is giving the benefit (goods) So when any transaction includes persons then

  • the rule of personal account is DEBIT THE RECEIVER

  • CREDIT THE GIVER In third example we have debited the benefit

  • (furniture) which is coming into the business & we have credited the benefit (cash) which

  • is going out from the business So when any transaction includes assets then

  • the rule of real accounts is DEBIT WHAT COMES IN

  • CREDIT WHAT GOES OUT & in fourth & fifth example we have debited

  • the expenses, & we have credited incomes, When any transaction is of expenses, incomes,

  • losses & gains then the rule of nominal account is,

  • DEBIT IS ALL EXPENSES & LOSSES CREDIT IS ALL INCOMES & PROFITS

  • (Here we can conclude that, assets & expenses have a debit balances as they are increasing

  • with the debit effect so the positive balance of asset is debit balance & negative will

  • be the credit Similarly, liabilities & incomes are having

  • a credit balance as they are increasing with the credit effecti.. the positive balance

  • for liabilities & incomes is credit balance & negative will bet the debit)

  • So now hope you guys have understood This total process of accounting is driven

  • by The dual aspect concept (two accounts affecting)

  • The nature of accounts (real, personal & nominal) The effects of debit & credit

  • So here is a small exercise for you all Column A Column B

  • Whenever we received something Personal Account

  • Whenever we give something DEBIT

  • Debit the receiver CREDIT Credit the giver

  • Debit all expenses & losses Real Account Credit all incomes & gains

  • Debit what comes in & Nominal account Credit what goes out

  • So thats all for todays session...I hope u all have enjoyed this sessionif u liked this

  • gives us a thumps up & if u have any quarrys share it on comment box given below

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  • Thank You...

In this session we are going to learn that every transaction has two effects i.e. Every

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B2 中高級 美國腔

借記與信貸 - 會計黃金法則 - 會計 - LetsTute Accountancy (DEBIT & CREDIT | Golden Rules of Accounts | Accounting | LetsTute Accountancy)

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    Jane 發佈於 2021 年 01 月 14 日
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