Debits and Credits Assignment Help

---

The Accounting system works on the double entry system. Double entry system is very simple according to which an accounting transaction affects two accounts. If one account increases the another one must decrease or apparently a liability must arise. In accounting language, it is known as when one account is debited another one gets credits.

The term Debit and Credit was arrived from the study of Luca Pacioli in 1494. She used the terms ‘Debere’ and ‘Credere’. Debre meant ‘to owe’ whereas Credere meant ‘to entrust’. These were Latin words. Debere is used as Debit (Dr) and Credere is used as Credit (Cr). Debit and Credit form the vital part of the accounts because they ensure the proper working of Book Keeping system. When one account is debited another one at the same time is credited with same amount. Thus the Trial Balance always tends to be equal in terms of Debit and Credit. If it does not match, then it means that there has got to be some error. Accountants use this trial balance for further formation of Accounts and Balance Sheet.

Principle of Debit and Credit:

The Debit and Credit rule is basically based on the double entry system. It majorly takes into consideration the Accounting equation.

Assets = Owner’s Equity + Liabilities

This equation can be further expanded by introducing the Expenses and Income into the equation. After the introduction the statement stands like this:

{`
  Assets + Expenses = Owner’s Equity + Liabilities + Income
  i.e.,

  Assets = Owner’s Equity + Liabilities + (Income – Expenses)

  Assets = Owner’s Equity + Liabilities ± Profit/Loss
  `}

Working of Debit Credit for different Accounting Elements:

1. Assets: Whenever the asset is put into business or any additional asset is introduced it gets debited. It’s a source for the business which is possessed by the business. If it gets depleted or reduced, then it is credited.

2. Liabilities: Liabilities are the obligations for the business i.e. business owes to the outsiders. This is a burden for the business. If a liability is increased, it gets credited and if the liability is decreased it gets debited.

3. Capital: Capital is also known as Owner’s Equity. It is the initial amount invested by the owner of the business in the business. This is treated as a liability in the business. If the additional capital is introduced, then it is debited. If any amount is withdrawn by the owner, it is debited.

4. Expenses: Expenses are the costs incurred by the business for day to day running of business. Whenever any expense is incurred it is debited.

5. Income: Income is the amount earned by the business from its business operations. Whenever any income is earned, it gets credited.

---

Debits and Credits Assignment Help By Online Tutoring and Guided Sessions from AssignmentHelp.Net

---

Rules of Debit and Credit:

Debit and Credit have their own rules. These can be understood by two approaches:

1. Traditional Approach: Under Traditional Approach the debit and credit are taken over by understanding the basic types of accounts.

This approach works as further:

Three types of accounts are:

(i) Personal Account: Personal account are the assets that refer to some individual person. The rule for the personal Account is: Debit (Dr): The Receiver, Credit (Cr): The Giver.

(ii) Real Account: The Real account deals with the assets and liabilities of the business. The rule for Real Account is: Debit (Dr): What comes in, Credit (Cr): What goes out.

(iii) Nominal Account: The Nominal Account deals with the incomes, gains, expenses and losses. The rule for Nominal Account is: Debit (Dr): Expenses and losses, Credit (Cr): Incomes and Gains.

2. Modern approach: The modern approach is quite simple to understand. It is just like the study of the five elements of accounting.

It works as follows:

• 1. Assets Account: Debit (Dr): If assets increase, Credit (Cr): If assets decrease
• 2. Liabilities: Debit (Dr): If liabilities decrease, Credit (Cr): If liabilities increase
• 3. Owner’s Equity: Debit (Dr): If owner introduces withdraws capital, Credit (Cr): If owner introduces additional capital
• 4. Expenses and Incomes: Debit (Dr): All expenses, Credit (Cr): All incomes

Uses of Debit and Credit:

Debit and Credit are the basics of accounting on which the whole accounting procedure operates. It is a crucial part of accounting.

1. Debit and Credit make the double entry system successful.
2. Debit and Credit check the errors. If the debit balance and credit balance do not match, then there must be some error.
3. They help in proper formation of accounting books.
4. They help in the formation of the journal, ledger accounts, trial balance, profit and loss account and Balance sheet.

Debit Cards and Credit Cards:

The debit and credit are very widely used these days in the banks in relation to plastic money i.e. Debit Card and Credit Card. Debit card means the card for which money has to be deposited with the bank first and then you get the privilege to spend it whereas in a Credit card you have the privilege to spend the money first and then you have to pay the amount to bank later. Debit and Credit here are used in connection to Asset and Liability.

Thus we see how Debit and Credit form an important part of the accounting system. They define the whole accounting system in a compact way.

Any accounting query or problem in your accounting statement will be immediately taken care of by our dedicated staff. Our staff stay active all the time to help you out. Assignmenthelp.net can be the best platform where you can get your assignments done and can get your queries solved. We not only solve your problems but also provide you with some excellent insights into the topic, tips for studying and other references. You will be assigned the teacher as per your assignments requirement. All you need to do it upload your assignment at assignmenthelp.net and set the deadline. You can also chat with our executives present online and get your queries solved. We know how much scoring well is crucial to you. This is why we put in best efforts for you to score good. We try to tackle your queries as early as possible. You can talk to our executives 24*7 and get help.

Apart from this you can also get the online coaching from the best and professional teachers who will help you in solving the doubts and help in the better understanding of the topic. What makes us distinct is our best serviced and dedicated work.

So what are you waiting for? Visit assignmenthelp.net now and experience the best.