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Lecture 4

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8 views

Lecture 4

Uploaded by

sfatima
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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Principles of

Accounting
Concept of Debit and Credit

• To keep your business’s financial records in


order, you need to track the money coming in
and going out — also known as balancing your
books. The individual entries on a balance
sheet are referred to as debits and credits.
• Debits (often represented as DR) record
incoming money, while credits (CR) record
outgoing money.
Any business that’s spending and receiving money will likely assign
transactions to one of five main account types:

• Asset accounts contain the resources a company relies on to


generate revenue (inventory, accounts receivable, cash).
• Expense accounts reflect the company’s cost of doing business
(delivery expenses, advertising expenses, materials, labor).
• Liability accounts show what the business owes to creditors
(accounts payable, salaries and wages, income taxes).
• Equity accounts refer to the owner’s equity in their company
(initial investments or stock holdings).
• Revenue Account: Revenue is the money that an individual
or a business earns from selling products or services to
their customers.it contain the receipts of the income or
revenue that the individual or company receives through
their business transactions.
The accounts for double entry

The double entry system divides each page into


two halves. The left-hand side of each page is
called the debit side, while the right-hand side is
called the credit side. The title of each account is
written across the top of the account at the
center
Points to remember:

• To increase an asset we make


a DEBIT entry
• To decrease an asset we make
a CREDIT entry
• To increase a liability/capital
account we make a CREDIT
entry
• To decrease a liability/capital
account we make a DEBIT entry.

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