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Rules of Debit and Credit

All accounts are divided into five categories for the purposes of recording the transactions:

(a) Asset

(b) Liability

(c) Capital

(d) Expenses/Losses, and

(e) Revenues/Gains.

Two fundamental rules are followed to record the changes in these accounts:

 

(1) For recording changes in Assets/Expenses (Losses):

(i) “Increase in asset is debited, and decrease in asset is credited.”

(ii) “Increase in expenses/losses is debited, and decrease in expenses/ losses is credited.”

 

(2) For recording changes in Liabilities and Capital/Revenues (Gains):

(i) “Increase in liabilities is credited and decrease in liabilities is debited.”

(ii) “Increase in capital is credited and decrease in capital is debited.”

(iii) “Increase in revenue/gain is credited and decrease in revenue/gain is debited.”

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All accounts are divided into five categories for the purposes of recording the transactions:

(a) Asset

(b) Liability

(c) Capital

(d) Expenses/Losses, and

(e) Revenues/Gains.

 

Two fundamental rules are followed to record the changes in these accounts:

(1) For recording changes in Assets/Expenses (Losses):

(i) “Increase in asset is debited, and decrease in asset is credited.”

(ii) “Increase in expenses/losses is debited, and decrease in expenses/ losses is credited.”

 

(2) For recording changes in Liabilities and Capital/Revenues (Gains):

(i) “Increase in liabilities is credited and decrease in liabilities is debited.”

(ii) “Increase in capital is credited and decrease in capital is debited.”

(iii) “Increase in revenue/gain is credited and decrease in revenue/gain is debited.

 

 

 

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