-Ankit Lal Kar, ACW Accounts at Edumarz
We already know every transaction involves give and take of consideration.
Each transaction affects at least 2 accounts in the double-entry system.
The amount entered on the debit side must be equal to the credit side of the entry.
Ledgers are prepared to classify the transaction.
Ledgers look like the English alphabet ‘T’.
T format has left and right side to record debit and credit item
For example – a creditors account must be credited when goods are purchased on credit and must be debited when payment is made to him,
Rules of debit and credit:-
All accounts are divided into five categories: assets, liabilities, capital, revenue/expenses, profit/losses.
For assets, expenses & losses:-
An increase in assets, expenses, losses must be debited,
Decrease in assets, expenses, & losses must be credited.
For Liability, capital & Profit:-
An increase in liability, capital & profit must be credited,
Decrease in liability, capital &profit must be debited.