How to decide whether the amount needs to be dr or cr

A/c entries 2532 views 5 replies

Tushar Dave

AVP

33 Points Joined October 2013

I am always confused when to pass the entry in debit side versus credit side. Is there rule for this?

I know there is a concept of accounting groups like sundry debtors, sundry creditors, loans & advances, etc.. is there a fixed rule by which i can decide when a journal entry is made, which side goes in debit and which side goes in credit.

Replies (5)

Danish

GST Practitioner

219 Points Joined March 2014

Hi Tushar, There is a Simple Logic theory Income. Increase Cr Expence Increase Dr Asset Increase Dr Liability Cr

Danish

GST Practitioner

219 Points Joined March 2014

Hi Tushar, There is a Simple Logic theory Income. Increase Cr Expence Increase Dr Asset Increase Dr Liability Increase Cr If it happens reverse Do reverse

harish ragav

student-IPCC

407 Points Joined April 2012

all expenses and assets having debit balance...i.e it should be debited..

for eg:

1.rent paid 1000

2. furniture purchased. 5000

journal entry:

rent (exp) ac dr 1000

to bank/cash* 1000

furniture ac dr 5000

to bank/cash 5000

all income and liablities are having credit balance... it should be credited

1.furniture sold 4000 bank/cash ac dr 4000

to furniture acc 4000

2.creditors 500 bank/cash ac dr 500

to creditors 500

In simple

p&l left hand side and assets = debit balance

p&l right hand side and liablities= credit balance

For more clearance go through golden rules of accounting

Regards,

Harish Ragav

Rupesh

51 Points Joined August 2011

I do it this way,

Remember that

debit=deposit=jama and credit=withdrawal=naame.
debit cash and bank accounts when money is deposited in them and credit when money is withdrawn from them.
similarly, debit assets/stock accounts thinking that assets are deposited when you purchase them and withdrawn when you sell them.
in case of capital accounts, if you owe money to A it means that you had taken money from A at sometime. So, debit the cash/bank account and credit A's capital account in case of a loan and vice-versa. You can also think that you are withdrawing/crediting money from A's account and depositing/debiting it in your accounts.
when you make an expense you are essentially spending money from your cash/bank. So, you need to credit the cash/bank account and therefore debit the expense account while making an expenditure entry.
when you earn income you are essentially getting some money either in cash/bank. So, you need to debit the cash/bank account and therefore credit the income account while making an income earned entry.
when you take a liability/loan, you are obtaining money from other's account. So, debit the cash/bank/asset account and credit the party's accounts while taking a liability.

When you come across a transaction try to break it down in simple terms and you will automatically understand how to make entries. Don't try to remember formulae for this. Just give it time and practice.