Page 22 - DCOM101_FINANCIAL_ACCOUNTING_I

Financial Accounting-I

Notes Following are the rules for debit and credit

(a) Assets Increase in Assets Debit
Decrease is Assets Credit
(b) Capital Increase in Capital Credit
Decrease in Capital Debit
(c) Liabilities Decrease in Liability Debit
Increase in Liability Credit

(d) Revenue Income Decrease in Revenue Debit
Increase in Revenue Credit
(e) Expenses Increase in Expenses Debit
Decrease in Expenses Credit

Thus, it is clear from the above rules of debit and credit that,
1. An increase in assets is recorded on the left hand side of account and decrease in assets on
the right hand side.

2. In case of Capital and liabilities: Increase is recorded on the right hand side of an account
whereas decrease is recorded on the left hand side of an account.

Task What will be the impact of following transactions on balance sheet?
1. R started business with cash of ` 500000

2. Machinery purchased for ` 100000.
3. Payment made to creditors of ` 20000
4. Goods sold for ` 15000

Caselet ICAI told to Hasten Process for Double-entry
Accounting System

here is a need to set up a separate committee for converting the single entry
accounting system to double entry. The process is rather slow. It should be
“Thastened,” Mr K. Rahman Khan, Honorary Deputy Chairman, Rajya Sabha,
and member of the Institute of Chartered Accountants of India (ICAI), said.
While stating that the accounting system has already been converted to double entry
in local bodies, Mr Khan added that the institute should play a vital role in monitoring
governmental expenditure.
‘A chartered accountant’s responsibility should not be limited to his clients alone. He owes
it to the society. The institute and the custodian of government expenditure - Comptroller
and Auditor General of India have already resolved to effect the conversion. Various
Contd...

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