Decrease Increase R Revenue D Debit C Credit E Expense C Credit D Debit C Capital D Debit C Credit A Assets C Credit D Debit L Liability D Debit C Credit Increase in Asset & Expense is Debit Increase in Revenue, Capital & Liability is Credit Decrease in Asset & Expense is Credit Decrease in Revenue, Capital & Liability is Debit 2 R E C A L=Revenue, Expense, Capital, Assets, Liability
Real Accounts –“Acount which relate to the assets or Liabilities of the business, Such as Cash A/c, Goods A/c, Furniture A/c and so on”Debit what comes in Credit what goes out Bought furniture for credit from Mr AliFurniture Account (Real account ) Mr ali Account ( personal account) Since furniture is bougth we can say that it is coming in thus furniture account is debited based on the principle. “debit what comes in “Sold good to Mr Umer on credit Good Account = Real account Mr Umer Account = Personal account Since we are selling good , we can say that it is going out thus we can sy that good account/Sale is to be credited based on the principle” Credit what goes out “Whether a particular real account (element) effected by an accounting transaction is to be debited or credited we need to identify whether the element is coming in to the organization or going out of it. In case of Real Accounts - Debit what comes in and credit what goes out.3 Golden Rules of Accounting Real, Nominal & Personal Accounts
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Personal accounts- “the elements or accounts which represent person and organization”Debit the benefit receiver Credit the benefit giver Paid cash to Mr ibrahm Cash account = Real account Mr Ibrahim = Personal account Since cash is being paid , we can say that Mr, Ibrahim is receiving (benefit) from the organization. Thus we say that Mr. Ibrahim account is to be debited based on the principle “ debit the benefit receiver”Bought goods on credit form Mr Ali Good account = Real account Mr Ali = Personal account Since the good are being bought on credit we can say that mr ali is giving (benefit) to the organization . thus we say that mr ali account is to be credited based on the principle “credit the benefit giver”Thought to be applied –Is he/she/it giving or is he /she/it taking To decide whether a particular personal account (element) affected by an accounting transaction is to be debited or credited, we need to identify whether the element is giving the benefit to the organization or taking the benefit form the organization. In case of Personal Account - Debit the receiver and Credit the giver.4