Why is the word "to" used with credit balance & "by" used with debit balance ?
6 Replies
sharath
(i)
(188 Points)
Replied 01 July 2014
For income
We are earning income BY sale of goods and incured expenses TO wards rent salries etc...
For B/s
We are raising funds BY loans and expend TO purchase assets.
CA SUDIPTA SINHA
(Commerce Coaching- Accounts Cost FM)
(735 Points)
Replied 01 July 2014
Suppose if the journal entry is cash a/c dr. To Capital a/c.
When posting to the ledger we write it as cash is debited ' To' capital a/c and capital is credited 'By' cash a/c. This happens in case of all journal entries.
Pooja
(Final CA)
(502 Points)
Replied 01 July 2014
You can understand the concept of "BY" &"TO" if you know the three golden rules of Accounts:
1. Real A/c- Debit what comes in, credit what goes out
2. Personal A/c- Debit the giver, credit the receiver
3. Nominal A/c- Debit all expenses and losses, credit all Incomes and gains
Also you should know how to classify a transaction i.e whether a transaction is a real A/c transaction or a personal A/c trns. or a Nominal A/c trns.
For Example: Mr. A buys goods for Cash
This is a Real A/c transaction & hence the entry will be -
Goods A/c Dr. (what comes in)
To Cash (what goes out)
ie By Goods & To Cash.
Hope your Doubt is cleared 
CA M.MD SAREEF
(+91-90920-53115 )
(708 Points)
Replied 01 July 2014
Just Like A Letter
To is To Address
By is From Address
Got IT :)
aamir
(student)
(27 Points)
Replied 04 July 2014
Nice example & explanation
Thnks shareef , pooja, mr sarath
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