Traders are required to maintain different books to keep accounting of the companies subject:

(I) Journal

(2) Ledger (it should be explained in another article)

Journal



In order to investigate the calendar, studied certain related terms and a procedure accounting, which are as follows:

The Account

business receipts and payments cash impact on cash from operations. Receipts extra cash balance and payments reduce cash balances. In order to increase or decrease the balance after each transaction we may put all increase together in one column and all decreases together in another column and find balance only when necessary. It will be much more convenient and time saving.

accounting, the device called the account is used for this purpose. The simple form of account is called a T account below. Increases in cash have been listed on the left hand side and decreases on the right hand side, the closing balance has been ascertained by reducing the total payments from the total left side.

payment in accounting

As is clear from the form of narrative above is divided into two parts: the left side is known as the “debit side” and the right side is known the “credit side.

amounts to the debit side (left hand side) are called debits and amounts on the credit side right) are called one.” To charge ‘means making bodies in the left side of the account “and” credit “means to make an entry in the right hand side of the account.

The words debit and credit have no other meaning in accounting.

Abbreviation used for debit and credit Dr. Cr .

Rules of payment (Equation based)

Dual aspect concept in accounting involves every accounting transaction would be declared a debit amount and an equal and opposite credit amount. Thus the principle that each option debit amount will be equal to the amount of credit has no exception. Equality debit and credit may be given in the form of equation:

Debit = Credit

In the previous article we discussed accounting equation:

AL = P

ie Assets-Liabilities = Funds owner or Capital

If each account was to be considered in isolation would be as if an increase was recorded in the debit side or the credit side and then the accounts are mutually dependent system of recording increases and decreases in the two sides had to be fixed. Traditionally or Conventionally increases in asset accounts are listed on the debit side while the increase in liabilities and capital are listed on the credit side. The above rule ensures that the account balances are totaled will confirm that the accounting equation discussed above

It gives rise to the following rules: ..

1. Increase asset accounts are debits are reduction unit.

2. Increase in liability accounts are credits, decreases are debits.

3. Increased equity owner of units are reductions debit.

Total categories of accounts maintained by any company will include accounts for costs, losses, revenues and profits as well as the assets, liabilities and fund owner. Rules on deposits and loans of assets, liabilities and capital has been stated above and the rules for expenses / losses and income / profits can be derived from the same.

4. The increase in spending / loss accounts are debit.

Since the expenses and loss when incurred and become lead to a reduction in share capital and ecreases in equity owner are debit, increases the cost and loss accounts are debit.

5. The increased revenue / profit accounts are credits.

Where revenue and profit already earned will lead to an increase in the capital and an increase in equity owner is one, it increases revenue and profit accounts are one.

Cash debit and credit discussed above are based on the accounting equation techniques. Conventional rules for debit and credit are based on the classification of accounts. These rules effectively give the same

results and act the same way. This old position just differently.