Accounting is called language of business. Keeping records is necessary in business, so that the records can be referred in future when needed. Accounting is responsible for recording transactions which are in money terms. The management decisions of a company are also considered.
Accounting is based on accounting concepts and principles. These concepts and principles are strictly followed by all the companies. Students need to know about these concepts as these are the bases of accounting. Accounting Homework Help Online deals with the proper guidance of these principles and concepts.
Three golden rules of accounting
There are three golden rules of accounting which should be known by every student of accounts as these rules should be followed in every stage of accounting.
Debit the Receiver and credit the Giver
This rule is used in case of personal accounts. When a person gives something to company that is treated as inflow and person must be credited in the books of accounts. When company is paying or giving something to a person then it will be treated as outflow and that particular account is debited.
Debit what comes in and credit what goes out
This rule is followed in case of real accounts. Real accounts are machinery, land and building etc., by default they have debit balances. If you are adding something to the existing account then debit it and if you are reducing something then credit it.
For example, if there is a purchase of machinery then debit in machinery account and if part of machinery is sold then credit the amount.
Debit all expenses and losses and credit all incomes and gains
This rule is applied in case of nominal accounts. The capital of a company has credit balance by default and it is a liability. When incomes and gains are credited, it increases the capital and by debiting all expenses and losses, capital is reduced.
These golden rules are well defined by the qualified professionals with examples for Accounting Homework Help Online.
What are Journal entries and Ledgers in Accounting?
Journal entries are passed by an accountant on the basis of the aforesaid rules of accounting. The accounts which are debited and accounts which are credited when known are written in an organized form is known as Journal entries. On the basis of these entries the accounts are made and balances are recorded in particular Ledgers. Accounting Homework Help Online deals with all the problems and confusions related to journal entries.
Problems faced by the students in passing journal entries-
- Students face many problems regarding Journal entries because of double entry system that is what to credit and what to debit.
- Three golden rules of accounting which is to be followed strictly while passing the entries.
- Many students get confused about closing journal entries. It must be kept in mind that closing entries are made for nominal accounts only.
- Treatment of sales / purchase return by referring debit / credit note is often confusing. Adjustments are required in amount payable and amount receivable.
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