KAINAT REHMAN

Debt and Credit Rules of Debt and Credit 15 Transactions

Something a company own, and which give it benefit and generate revenue for the business is debt. It is considered to be positive. Something which create liability and responsibility on the business is credit. And it is considered to be negative.

In Accounting: Debits represent increases in value of assets and expenses and decreases in income, liabilities and equity Credits represent increases in liabilities, equity and income and decreases in assets and expenses

An element (account) that is effected by an accounting transaction is either debited or credited (with an amount that is reflected in the transaction) depending on the nature of the account and the rule applicable to it.

There are 4 golden rules of debit and credit in accounting. 1. Debit which comes in and credit which goes out. 2. Debit the receiver and credit the giver. 3. Debit all gain/profit and credit all loss/expenses. 4. Debit must be equal to credit.

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), and a decrease is recorded as credit( right side).

ACCOUNT TYPE Asset Liability Income Expense Equity

DEBIT + +

CREDIT + + +

In accounting, a "journal" refers to a financial record kept in the form of a book, spreadsheet, or accounting software that contains all the recorded financial transaction information about a business. OR A journal details all the financial transactions of a business and which accounts these transactions affect Typically, journal entries are entered in chronological order

1. A department purchase computer of worth Rs. 12000 on cash payment.

DATE ENTRY LP DEBIT CREDIT

11 MAY, 2011 Cash computer

Rs.12000
Rs.12000

Narration. Purchase of computer on Rs. 12ooo

2. IMS purchase split on worth Rs. 40,000 and on account payable Rs 20,000.
DATE ENTRY LP DEBIT Rs.40,000 Rs.20,0000 CREDIT

11 MAY, 2012

Cash AC Account payable

Rs.20,000

Narration: purchase of Ac on and account payable.

3. IMS purchased a table for a classroom or worth Rs. 2,000.

DATE 12 APRIL, 2012 ENTRY Cash Table LP DEBIT CREDIT Rs. 2000 Rs.2000

Narration: purchase of table on account of full payment.

4. IMS purchased a generator worth Rs. 1,50,000. amount paid is Rs. 10,0000 and remaining on account payable.
DATE 15 JUNE, 2011 ENTRY Cash Generator Account payable LP
.

DEBIT

CREDIT Rs. 10,0000

Rs. 1,50,000
Rs.50,000

Narration: generator purchased on advance payment and account payable.

5. Owner invested $10,000 in the company.

DATE 2nd jan, 2012 ENTRY Cash Capital LP DEBIT $10,000 $10,000 CREDIT

Narration: owner contributed $10,000 in cash.

6. The company borrowed $20,000 from the bank.

DATE 14 JAN, 2011 ENTRY Cash Borrow LP DEBIT $20,000 $20,000 CREDIT

Narration: borrowed $20,000.

7. The company purchased $6,000 merchandise(6oo units) on credit.

DATE ENTRY LP DEBIT CREDIT

14 FEB,2012 Merchandise .
Account payable .

$6,000
$6,000

Narration: purchased $6,000 merchandise on credit.

8. A company paid $35,000 salaries to their employees.

DATE ENTRY LP . DEBIT $35,000 CREDIT 14 JAN, 2012 Salaries expense Cash

$35,000

Narration: salaries paid $35,000.

9. A company paid $1,500 rent.

DATE ENTRY LP DEBIT $1,500 CREDIT 14 MAY,2011 Rent expense Cash

$1,500

Narration: rent paid $1,500.

10. A Honda company purchase mirror glass worth Rs.20,0000 , pay cash of 15,0000 and remaining will be paid next month.
DATE 18 APRIL, 2012 ENTRY Cash Account payable LP . . DEBIT CREDIT Rs. 15,0000 Rs.5,0000

mirror

....

Rs.20,0000

Narration: purchased mirror and account payable.

11. Honda purchased tyers worth Rs 5o,ooo

DATE 15JUNE, 2011 ENTRY Tyres cash LP DEBIT Rs.50,000 Rs. 50,000 CREDIT

Narration: tyres purchased on full cash payment.

12.

Building land was purchased against Rs. 12,5000. building price is Rs, 75000, land price is Rs. 50,000, cash paid is, Rs 75000, remaining against payable account.
ENTRY LP DEBIT CREDIT

DATE

2 MAY,2012

Building Land Cash Account payable

. . . .

Rs. 75000 Rs.50ooo

Rs.75000 Rs.50000

Narration: purchase of building and land cash advance and account payable.

13. A cricket kits is purchased by PCB worth Rs 45,000.

DATE ENTRY LP .. .. Rs. 45,ooo DEBIT CREDIT Rs. 45,000 18 JULY,2011 Cash Cricket kit

Narration: a cricket kit of Rs 45000 are purchased.

14. A white papers is purchased for office use worth Rs. 2800.
DATE 18 MARCH, 2012 ENTRY Cash paper LP . . Rs. 2800 DEBIT CREDIT Rs. 2800

Narration: white paper of Rs.2800 are purchased.

15. A mill purchased cotton of worth Rs. 50,000. they paid 40,000 cash and remaining against account payable.
DATE 14 JAN,2012 ENTRY Cash Cotton Account payable LP . . . DEBIT Rs. 50,000 Rs.1o,ooo CREDIT Rs.40,000

Narration: cotton purchased on cash and account payable.

Teacher lecture. http://accountinginfo.com/study/je/je-01.htm http://accountinginfo.com/study/accrual101.htm http://www.quickmba.com/accounting/fin/jo urnal-entries/ http://www.accountingcoach.com/onlineaccounting-course/07Xpg02.html