Understanding accounting

Hi Champs,

 

I need help in understanding accounting though it is very basic.

How debit and credit applies to Profit and Loss Account.When we debit and credit Profit and Loss account.

Below is a piece of text i got from other website

 

  • Assets and Expenses
    An increase is recorded as debit (left side)
    A decrease is recorded as credit (right side)
  • Liabilities, Equities and Revenues
    A decrease is recorded as debit (left side)
    An increase is recorded as credit (right side)
  • Contra-accounts
    Contra-accounts behave exactly in opposite way to the respective normal accounts.
  •  
  • Why is it all ways we need to follow above rules any reason behind above statements.
  •  
  • Any good book or websource for understanding financial accounting.
  •  
  •  
  •  
Replies (1)

All this can be understand easliy by basic principals of accounting

1.Personal accounts Classification Rules

Debit ::Receiver

Credit::Giver

 

2.Real account Classification Rules 

Debit:: Debit what comes in

Credit:: What Goes Out

 

3.Nominal account Classification Rules

Debit:: Debit All Expenses/Losses

Credit::All Gains/Incomes

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