In this world, the power of making is in the hand of God. We can not
make anything, we can just copy from the creation of God. God also gives
us brain for knowing his creation and using it for new creation.
Accounting rules are also take from God's accounting. God records each
movement of his created creature. He maintains all these records and he
gives us result as per his accounting records. We also try to learn this
accounting by maintaining our business records. First of all, we have
to learn to make journal entry.
Journal entry is the first step of recording the transaction. If you will learn its technique, you will be able to record every transaction of the world in correct way. Rules are very simple
One account will be debit and other account will be credit.
Now, problem is to find two accounts. Which account will be debited and which account will be credited? Answer this question is also simple.
Learn the Rules of Journal entry.
1. For personal account
Receiver will be debited and giver will be credited. But this is not possible in all transaction because there may be only receiver or giver of anything in any transaction.So, we have to write just debit or credit the name of person as per the nature of transaction.
2. For Assets account
Assets will be debited when it comes to the business and asset will be credited when it goes from business. It means when we purchase the asset, it will be debited. It means when our total assets will be increased due to new buying, at that time new bought asset will be debited. When assets are sold, these assets will be credited. But some time we do not sell the asset but when we buy the asset with cash, our cash asset will decrease, so cash will be credited.
3. For Income and expenses account
All the expenses and losses will be debited and all the incomes and gains will be credited. You should never confuse expenses of buying asset with other general expenses. Assets gives long term benefit, so we will apply second rule instead of third rule. We only include the expenses which gives us one year or small period benefits. For example one month mobile charges will be our expense and it will be debited.
Related : Journal Entries Examples
Journal entry is the first step of recording the transaction. If you will learn its technique, you will be able to record every transaction of the world in correct way. Rules are very simple
One account will be debit and other account will be credit.
Now, problem is to find two accounts. Which account will be debited and which account will be credited? Answer this question is also simple.
Learn the Rules of Journal entry.
1. For personal account
Receiver will be debited and giver will be credited. But this is not possible in all transaction because there may be only receiver or giver of anything in any transaction.So, we have to write just debit or credit the name of person as per the nature of transaction.
2. For Assets account
Assets will be debited when it comes to the business and asset will be credited when it goes from business. It means when we purchase the asset, it will be debited. It means when our total assets will be increased due to new buying, at that time new bought asset will be debited. When assets are sold, these assets will be credited. But some time we do not sell the asset but when we buy the asset with cash, our cash asset will decrease, so cash will be credited.
3. For Income and expenses account
All the expenses and losses will be debited and all the incomes and gains will be credited. You should never confuse expenses of buying asset with other general expenses. Assets gives long term benefit, so we will apply second rule instead of third rule. We only include the expenses which gives us one year or small period benefits. For example one month mobile charges will be our expense and it will be debited.
Related : Journal Entries Examples
No comments:
Post a Comment