Debit and Credit

A/c entries 1868 views 5 replies

Rangarajan

CA Student

200 Points Joined June 2008

Hi Every One

I have a doubt in the golden rules.

I learned the following,

For Real Accounts – Debit Inwards and Credit Outwards

For Nominal Accounts – Debit Expenses and Credit Incomes

For Personal Accounts – Debit the Receiver and Credit the Giver

Take a look at the following entries I pass:

Descripttion of the transaction	Entries I pass

Sale to a customer for Rs. 100	Customer a/c 100 Sales a/c 100
Receipt of Rs. 90 on the proceeds of sale after a discount of Rs. 10.	Bank a/c 90 Customer a/c 90
Discount of Rs. 10 booked	Discount a/c 10 Customer a/c 10

The above entries were learned by me from my professors and seniors.

Now, my doubt

In the last entry of booking discount, why do you credit the customer? As per the rule, one can credit the party only when he when he gives. But he doesn’t give anything.

I know that everyone passes entries as per the golden rules. I want to know how the golden rules were formed. I want to how whether anyone has gone beyond the golden rules.

What I want to know is

Particulars	Rules Followed	Why not this followed at the time of creation of Debit and Credit
For Real Accounts	Debit Inwards and Credit Outwards	Credit Inwards and Debit Outwards
For Personal Accounts	Debit the Receiver and Credit the Giver	Credit the Receiver and Debit the Giver
For Nominal Accounts	Debit all Expenses and Credit all Incomes	Credit all Expenses and Debit all Incomes

Please give your comments and opinions on my query. I am not telling what we follow is wrong but I want to analyze the situation.

Regards

Rangarajan.K

Replies (5)

jayram

abc

32 Points Joined June 2008

[disclaimar]

I am engineer learning accounting so i might be totally wrong. I will answer your question in 2 parts

1. In the given example why we credited customer. Although he did not "physically" give cash, he fullfills his obligation to paying additional 10 Rs towards your firm as he is allowed a discount. Which is same as giving 10 Rs. Also the discount is a debit entry so matching entry will be a credit entry

2. In your second table you ask why things arent done the way opposite to how they are being right now. If you look at any introduction to accounting, they clearly say that "debit" and "credit" are conventions. Its like asking why do we drive on left in india why not on right? We do that because following convention,ensures that all of us are on the same page. As long as entire world starts following the conventions you specified, I dont see any issues as far as descipline of accounting is considered

Hope this answers your question

Regards

Jayram

Rangarajan

CA Student

200 Points Joined June 2008

Thanks Jayaram for ur comments But still not answering my questions For crediting the party, ur just telling there is one debit so the other must be a credit. I want the reason for the same. For the second question, I want to know why such conventions are followed blindly?

Navin

Audit Assistant

56 Points Joined October 2007

Think like this. A Value of 10 is given by/taken from the customer T-account and this value is received by "discount allowed" T-a/c. The physical customer is not giving anything. But the account that represents him in our account books is giving value to another account in our books called Discount allowed.

Hope I made myself clear.

jayram

abc

32 Points Joined June 2008

Originally posted by :Rangarajan
"	Thanks Jayaram for ur comments But still not answering my questions For crediting the party, ur just telling there is one debit so the other must be a credit. I want the reason for the same. For the second question, I want to know why such conventions are followed blindly?	"

Allowing discount to a customer , from a customer side is equvalent of him fullfilling his side of deal, which was to pay remaining 10 Rs. So he is the giver, credit the giver hence credit the customer.

Also conventions are by definition supposed to be followed blindly. I mean male parent is called as father. No one says why I shouldnt call him mother. :)

I hope this answers your questions.

Guest

427630 Points Joined August 2012

Originally posted by :Rangarajan

hi frnd....

according 2 u its right tat v learned dose golden rules...

i.e reala/c: dr wat cums in & cr wat gose out

personal a/c: dr d receiver cr d giver

nominal: dr expns cr incomes.......

u hv doubt in d entry ....discount a/c is dr by rs.10

customer a/c is cr by rs. 10

In general v can say tat v hv discounted of rs 10....

so for company or person who is selling d goods,for him its a loss so we will dr the discount a/c.......

in d other case, customer paid only rs.90 other 10/- will b profit to him or v can say he saved his 10/- so....customer a/c will b credited...

wat v r following is right i think.....not only we should make entries according to rules but also according to d situations rule will change by its own....

I think this is right.....

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Hi Every One
I have a doubt in the golden rules.

I learned the following,

                For Real Accounts – Debit Inwards and Credit Outwards
                For Nominal Accounts – Debit Expenses and Credit Incomes
                For Personal Accounts – Debit the Receiver and Credit the Giver

Take a look at the following entries I pass:

Descriptttion of the transaction

Entries I pass

Sale to a customer for Rs. 100

Customer a/c             100
Sales a/c                                 100

Receipt of Rs. 90 on the proceeds of sale after a discount of Rs. 10.

Bank a/c                       90
Customer a/c                           90

Discount of Rs. 10 booked

Discount a/c                 10
Customer a/c                           10

The above entries were learned by me from my professors and seniors.

Now, my doubt

In the last entry of booking discount, why do you credit the customer? As per the rule, one can credit the party only when he when he gives. But he doesn’t give anything.

I know that everyone passes entries as per the golden rules. I want to know how the golden rules were formed. I want to how whether anyone has gone beyond the golden rules.

What I want to know is

Particulars

Rules Followed

Why not this followed at the time of creation of Debit and Credit

For Real Accounts

Debit Inwards and Credit Outwards

Credit Inwards and Debit Outwards

For Personal Accounts

Debit the Receiver and Credit the Giver

Credit the Receiver and Debit the Giver

For Nominal Accounts

Debit all Expenses and Credit all Incomes

Credit all Expenses and Debit all Incomes

Please give your comments and opinions on my query. I am not telling what we follow is wrong but I want to analyze the situation.
Regards
Rangarajan.K