what is the meaning of the terms credit and debit?what is the meaning of the line or phrase"credit in debit out"????explain with a suitable example i am not able to undrestand what these terms actually mean in a transaction pls explain thoroughly so that i can get the concept clear in my mind!!!!pls help guys!
Answers
Answered by
0
its very simple..there are three golden accounting principles..
.1)Debit The Receiver, Credit The Giver. This principle is used in the case of personal accounts. ...(personal accounts means all those referred to names of the people or organisation etc.,.for eg... received cash from sonia 1000rs..here sonia is the name of a person.. so while writing a journal entry for personal account we should follow this golden rule.. debit the reciever credit the giver.....cash comes from sonia.so sonia is the giver.so we should credit her account while writing a journal entry.... so journal entry will be
cash a/c dr 1000
to sonia a/c 1000
now you may think that..it is given that reciever should be debited and giver should be credited..but here im debiting cash a/c .its because we will not prepare our own account separately our accounts right!. then when "Debit the reciever"is useful means ..if cash is paid to rohit then in our accounts..we will write
Rohit a/c dr 1000
to cash a/c.. ( here we will use "debit the reciever.. because u are paying and rohit is recieving) ..
2)Debit What Comes In, Credit What Goes Out. This principle is applied in case of real accounts. ..
(this is what you are primarily asking in the question).. the above first rule is exclusively for personal and this second rule is exclusively for real accounts..real accounts means all those related to assets...so "debit what comes in" means
We should debit whatever(assets) comes in...eg. cash recieved from rohit... here whats coming..'cash'.. so we should debit cash and 'rohit' is a personal account..so rule will be credit the giver.... so we will finally get
cash a/c dr
to rohit a/c
now"credit what goes out means"..we should credit whatever goes out"..eg.. cash paid to sonia...the two accounts involved here are cash (real account) and sonia(personal account)..
since cash is going out we should credit and sonia is recieving we should debit her as Per golden rules of accounting..thats how we get
sonia a/c dr
to cash a/c
3)Debit All Expenses And Losses, Credit All Incomes And Gains..this is the last one...here we should debit all expenses and lossess ,credit all incomes and gaims.. eg..salaries paid... so salaries is an expense to us so we should debit and salaries are generally paid out of cash or bank..so credit what goes out(2nd rule)..
we will finally get.
salaries a/c dr
to cash a/c
now "credit all incomes and Gains"..eg.. salary recieved..it is an income to us ..so we should credit... we will recieve salary in the form of cash or bank right...so two accounts involved here will be salary(income)and cash(real account).so debit what comes in(2ndrule)..cash comes in and credit all incomes and Gains.. salary is an income..
we will finally get..
cash a/c dr
to salary a/c
at first it seems to be confusing but as u practice..it will be lot easier..and u will be able to explain it to others also..just like im doing now .all the very best!
.1)Debit The Receiver, Credit The Giver. This principle is used in the case of personal accounts. ...(personal accounts means all those referred to names of the people or organisation etc.,.for eg... received cash from sonia 1000rs..here sonia is the name of a person.. so while writing a journal entry for personal account we should follow this golden rule.. debit the reciever credit the giver.....cash comes from sonia.so sonia is the giver.so we should credit her account while writing a journal entry.... so journal entry will be
cash a/c dr 1000
to sonia a/c 1000
now you may think that..it is given that reciever should be debited and giver should be credited..but here im debiting cash a/c .its because we will not prepare our own account separately our accounts right!. then when "Debit the reciever"is useful means ..if cash is paid to rohit then in our accounts..we will write
Rohit a/c dr 1000
to cash a/c.. ( here we will use "debit the reciever.. because u are paying and rohit is recieving) ..
2)Debit What Comes In, Credit What Goes Out. This principle is applied in case of real accounts. ..
(this is what you are primarily asking in the question).. the above first rule is exclusively for personal and this second rule is exclusively for real accounts..real accounts means all those related to assets...so "debit what comes in" means
We should debit whatever(assets) comes in...eg. cash recieved from rohit... here whats coming..'cash'.. so we should debit cash and 'rohit' is a personal account..so rule will be credit the giver.... so we will finally get
cash a/c dr
to rohit a/c
now"credit what goes out means"..we should credit whatever goes out"..eg.. cash paid to sonia...the two accounts involved here are cash (real account) and sonia(personal account)..
since cash is going out we should credit and sonia is recieving we should debit her as Per golden rules of accounting..thats how we get
sonia a/c dr
to cash a/c
3)Debit All Expenses And Losses, Credit All Incomes And Gains..this is the last one...here we should debit all expenses and lossess ,credit all incomes and gaims.. eg..salaries paid... so salaries is an expense to us so we should debit and salaries are generally paid out of cash or bank..so credit what goes out(2nd rule)..
we will finally get.
salaries a/c dr
to cash a/c
now "credit all incomes and Gains"..eg.. salary recieved..it is an income to us ..so we should credit... we will recieve salary in the form of cash or bank right...so two accounts involved here will be salary(income)and cash(real account).so debit what comes in(2ndrule)..cash comes in and credit all incomes and Gains.. salary is an income..
we will finally get..
cash a/c dr
to salary a/c
at first it seems to be confusing but as u practice..it will be lot easier..and u will be able to explain it to others also..just like im doing now .all the very best!
Similar questions