Give the rules of debit and credit under Modern method of classifications and explain them with imaginary examples
Answers
Answer:
An accounting expression starts with 'Debit' and 'Credit'. You might be wondering what is debit and credit? Also, this is intriguing enough why is it that if we debit some accounts, it makes them go up while when some other sets of accounts get debited, it goes down? More importantly, how is this important for any business?
In a nutshell, recording all the money flowing into the account is the basis of debit while recording all the money flowing out of the account is the base of credit.
Debit and Credit in Accounting
Debit and Credit are the two accounting tools. Business transactions are to be recorded and hence, two accounts, which are debit and credit, gets facilitated. These are the events that carry a monetary impact on the financial system. While keeping an account of this transaction, these accounting tools, debit and credit, comes in the play. Whenever accounting transactions take place, it majorly affects these two accounts.
'In balance' is such an accounting transaction where the total of the debit and credit matches or is equal. In contrast, if the debit is not equal to the credit, creating a financial statement will be a problem.
The business transaction is separated into accounts while doing the bookkeeping. The commonly affected accounts are-
Assets
Expenses
Liabilities
Equity
Revenue
Explanation:
Give the rules of debit and credit and explain them with...
cash withdrawn for office use. Cash is coming in ..so it should be Debited..and Cash from bank is going out..so it should be credited.. ...
Goods Purchased from Mr Star on credit. ...
Goods Sold for cash.