Debit, credit in layman language is additions, subtractionsâ€™ to a financial statement. Debit is the left-hand side of a journal and credit is the right-hand side of a journal. Expenses, any losses are recorded as debit account and liability, income and capital balances are termed as credit balances. In journal entries, debit is recorded as â€œDrâ€ while credit is recorded as â€œCr.â€
Rules for Debit and Credit Homework Answers by accounts classification
Understanding classification of accounts is a major step in understanding the concept of debit and credit. In traditional approach the account is classified as follows; Personal, real and nominal.
- Personal account
Personal accounts are classified as natural, representative and artificial accounts. Human beings like â€œDiana,â€ â€œDonald,â€ represent natural personal a/c and artificial personal a/c are related to a company like â€œSandra and Bros account â€œand so on. Representative personal a/c represents a concept like outstanding wages that is meant for a group of persons.
Prepaid salaries paid to workers, outstanding salaries paid to workers belong to the class of representative account. Capital bought into the business, bank a/c, partners loan a/c, partners current a/c, outstanding salary a/c. Others are like bank overdraft, interest accrued a/c, prepaid rent a/c, drawings account are some of the examples of personal a/c in the traditional approach.
- Real account
This account is divided into tangible and intangible account. Tangible accounts are those accounts that can be touched properly like building, furniture, cash and machinery and so on. Intangible accounts do not have any physical shape like the goodwill, brand name, and trademark.
Building purchased account, purchases account, cash paid account, and sales account, printing, and stationery account are bought account. Cash received account, sales returns account, furniture purchased account, purchase returns accounts are some of the examples of real account. Understanding the basics is an important task for completing rules for debit and credit homework answers.
- Nominal account
This account is related to gains and losses. This accounting is also known as the income and losses accounting. Expenditure accounts like salary and income accounts like sales receipts are part of nominal accounts. Interest paid and commission received belongs to this account. Traveling charges, subscription received, bad debts recovered, repairs incurred are other examples of nominal account. Carriage inwards paid and carriages outwards paid are examples of nominal account.
Rules of debit and credit for various accounts
- Personal account:
The rule of credit and debit for personal account is as follows. Debit, which is the receiver or the one who receives something; and credit, stated to be the giver.
- Real account:
The rule of credit and debit for real account is as follows. Debit can be stated as what comes in, whereas credit can be stated as what goes out.
- Nominal account:
Debit relates to all losses and expenses. Credit relates to all incomes and gains are the rules here.
These are the rules that a student should master under rules for debit and credit homework answers; and there is professional expert help that is available through online to guide the student.
Examples based on the rule of debit and credit
Assume that a company paid their salary as $40,000. The first thing is to find out where salary accounts belong to and we can infer that it belongs to a nominal account.
Salaries account or salary A/c Dr $40000
To cash a/c $40000
The reason is that debit all expenses is the rule for a nominal account and cash paid as salary is an expense.
Furniture for a firm is purchased for $ 25000
Furniture belongs to real account as furniture belongs to lifeless and the rule is debit what comes in. In the example furniture is purchased by the firm and that is to be debited.
Furniture a/c Dr $ 25000
To cash a/c $ 25000
Sold goods to Mr. A for $ 45000
Here A is a person who belongs to a personal account, and the rule is debit the receiver.
Mr. A a/c Dr $ 45000
To sales a/c $ 45000
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