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Rules For Debit & Credit as Per Traditional Approach

Types of accounts

Rules for Debit

Rules for Credit

Personal account

Debit the receiver

Credit the giver

Real account

Debit what comes in

Credit what goes out

Nominal account

Debit all expenses & losses

Credit all incomes & gains


In nutshell

 

 

Illustration 1

Classify the following accounts based on traditional and accounting equation approaches
 

1) Capital brought into the business

2) Building purchased

3) Purchases account

4) Carriage inwards paid

5) Cash paid

6) Sales account

7) Carriage outwards paid

8) Cash received

9) Discount allowed

10) Sales promotion expenses

11) Interest received

12) Entertainment expenses

13) Subscription paid

14) Commission paid

15) Light, power and electricity

16) Insurance premiums paidt

17) Bad debts written off

18) Discount received

19) Bank account

20) Printing and stationery bought

21) Loan account of a partner

22) Bad debts recovered

23) Repairs incurred

24) Telephone, telegram and postage expenses incurred

25) Wages and salaries paid

26) Current account of a partner

27) Subscription received

28) Furniture purchased

29) Travelling charges

30) Sales returns

31) Bank overdraft

32) Purchases returns account

33) Outstanding salary account

34) Prepaid rent account

35) Interest accrued account

36) Interest received in advance account

37) Drawings account

38) Interest paid

39) Commission received

 


Solution
:

According to traditional approach:

  1. Personal Accounts-----1, 19, 21, 26, 31, 33, 34, 35, 36, 37
  2. Real Account----2, 3, 5, 6, 8, 20, 28, 30, 32
  3. Nominal Account----4, 7, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 22, 23, 24, 25, 27, 29, 38, 39





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