The following are the rules of debit and credit that guide the system of accounts, they are known as the Golden Rules of accountancy: This is how debit and credit find their use. Thus, the use of debits and credits in a two-column transaction recording format is the most essential of all controls over accounting accuracy. The totals of the debits and credits for any transaction must always equal each other so that an accounting transaction is always said to be in balance. There is no upper limit to the number of accounts involved in a transaction but the minimum cannot be less than two accounts. Whenever an accounting transaction happens, a minimum of two accounts is always impacted, with a debit entry being recorded against one account and a credit entry being recorded against another account. It is positioned on the right in an accounting entry. Or decreases an asset or expense account. A credit is an accounting entry that increases either a liability or equity account.It is positioned on the left in an accounting entry. Or decreases a liability or equity account. A debit is an accounting entry that either increases an asset or expense account.In a ledger account, usually, the debit column is on the left and the credit column is on the right. However, by debiting and crediting two different accounts, the correct and apt accounting treatment can be depicted. The net effect of these accounting entries is the same in terms of quantity. In order to record such transactions, a system of debit and credit has been devised, which records such events through two different accounts. Debit and Credit in AccountingĮvery business transaction which can be measured in monetary terms finds a place in the accounting transactions of a firm.

Let us study what a debit and credit are and how it works in accounts.

It is important that the accounts should be maintained properly on these rules, in order to ensure the accuracy of results displayed by such books of accounts. Without these rules, the world of accounting would be a haphazard mess. If there is something that runs the world of accounting, it is the rules of debit and credit. The compilation of these Recording Transactions Notes makes students exam preparation simpler and organised.

Debit credit rules