We can say that by nature there are only five accounts in the world and thousands of accounts must be related to any one of the following nature:
- Assets
- Liabilities
- Proprietorship
- Revenue
- Expenses.
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Assets mean the resources of the business or the commodities possessed by the business.
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Liabilities mean the claims of the suppliers of cash or commodities or the obligation of the business to pay at a certain period.
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Proprietorship means the claims of the owner of the business for his interest up to his investment after finalizing the expenses and revenue up to the date.
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Revenue means any type of income directly or indirectly of the business.
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Expense means any type of expense directly or indirectly of the business.
Rules for Debit and Credit :
Debit Nature of Accounts Credit
Increase Assets Decrease
Decrease Liabilities Increase
Decrease Proprietorship Increase
Decrease Revenue/ Income Increase
Increase Expenses Decrease
Golden Rule Of Debit And Credit ;-
1. In Personal Account –
(A) Debit The Receiver
(B) Credit The Giver
2. In Real Account –
(A) Debit What Comes In
(B) Credit What Goes Out
3. In Nominal Account –
(A) Debit All Losses And Expencess
(B) Credit All Profit And Gains
Golden Rule Of Debit And Credit ;-
1. In Personal Account –
(A) Debit The Receiver
(B) Credit The Giver
2. In Real Account –
(A) Debit What Comes In
(B) Credit What Goes Out
3. In Nominal Account –
(A) Debit All Losses And Expences
(B) Credit All Profit And Gains
posted by Raushan