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Basics of Accounting | Concept of Double Entry (Debit and Credit)BY: Muhammed Haris | Category: Education | Post Date: 2009-07-19
It has become a mandatory requirement for everybody to know about the basic methods of accounting. Here is a brief explanation about the basics of accounting. Accounting has many international standards; IAS (International Accounting Standards) Board ensures that the double entry system of keeping records has been followed. In the past, international accounting standards (IAS) were issued by the Board of the International Accounting Standards Committee (IASC) and it is followed among most business houses across the world. The double entry system is a system of book keeping, wherein each and every transaction (a business event), has to be recorded in the books of both the parties, by giving both debit and credit effects. Debit and credit cannot be given a single definition. The meaning of the terms debit and credit differs based on the nature of the transaction. Every transaction has two parties in it and every transaction has a debit and a credit effect for it. A debit and a credit effect have to be given to the two accounts involved in it. For a simple example, when a person lends loan to another person, the loan given is an asset to the giver, because it generates revenue for him. So it has to be debited and cash account has to be credited, because cash balance should be reduced when he gives loan. This is the concept of double entry in accounting. There are three forms of accounts: Real, personal and nominal. * Real account is about assets. * Personal account is about personal transactions. * Nominal account is about incomes and expenses. The rules of debiting and crediting these accounts, is as follows. These rules are called as -Golden rules of accounting-. Real Accounts: Debit what comes in and credit what goes out. Personal Accounts: Debit the receiver and credit the giver. Nominal Accounts: Debit all expenditures and losses. Credit all incomes and gains. Article Source: http://www.saching.com About Author / Additional Info: Additional Articles: * 10 Ways to Avoid Medical Debt: By Maya Jinwright * THE THREE INGREDIENTS OF A BETTER RELATIONSHIP * Steps involved in doing a quality review of products and services * Environmental ethics: From unsustainable to sustainable development * Benefits of Drinking Tea - Why people drink Tea? Does this article violate or infringe on your copyright ? It is a violation of our terms for authors to submit content which they did not write and claim it as their own. If this article infringes on your copyrights, then use our Contact us form with the detailed proof of infringement along with the offending article's title, URL and writer name. If you do not hear back from us then contact us again in another 10 days. Thank you. Comments on this article: (0 comments so far) * Additional comments are now closed for this article *
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