Rules of Debit & Credit

 Rules of Debit & Credit

Rules of Debit & credit for transaction have been explained below

1.   Every Debit has a Credit:

The first rule of debit & credit is that every debit has a credit. This is precisely called the dual aspect of accounting. This is the most important rule for book keeping or accounting.

2.   Debit Side is equal to Credit Side:

In each financial transaction, the debited amount must be equal to credited amount. Thus we can say that debit is always equal to credit. This is another important rule in book keeping. This rule provides a basic control structure for accuracy and completeness.

3.   Rules for Expenses & Assets.

Increase in expenses & assets are debited, while decrease in expenses & assets are credited. Thus assets & expenses share the same rules of debit & credit. This rule can be explained with an example

a)    Rent paid of 50,000

b)   Plant purchased 70,000 on cash

Rent being an increase in expense will be debited; while cash paid being decrease in asset would be credited.

Date	Particular	Folio	Dr.	Cr.
21.08.2016	Rent		50,000
21.08.2016	Cash			50,000

Plant purchased being increase in asset would be debited; while cash paid being decrease in asset would be credited.

Date	Particular	Folio	Dr.	Cr.
21.08.2016	Plant		70,000
21.08.2016	Cash			70,000

4.   Rules for Liability, income & Equity

Debit & credit rules are same for liability, income and equity. Increase in liability, income and equity are credited, while decrease in these elements is debited. Rules of debit and credit for these items are opposite to rules for expenses & assets. This rule can be explained with examples

a)    Cash sales 60,000

b)   Plant purchased 70,000 from ali on credit

Cash being increase in asset would be debited, while sale being increase in income would be credited. This is shown below

Date	Particular	Folio	Dr.	Cr.
21.08.2016	Cash		60,000
21.08.2016	Sales			60,000

Plant purchased being increase in asset would be debited; while Ali /Creditor account will be credited due to increase in liability.

Date	Particular	Folio	Dr.	Cr.
21.08.2016	Plant		70,000
21.08.2016	Creditor (Ali)			70,000

5.   List of debit & Credit Rules

The above rules can be listed as follow

1.    Every debit has a credit.

2.    Debit is always equal to credit.

3.    Increases in expenses & asset are debited.

4.    Decrease in expense & asset are credited.

5.    Increase in liabilities & incomes are credited.

6.    Decrease in liabilities & incomes are debited.