Debit and Credit in AccountingAs is clear from the form of
account given above it is divided in two parts: Left-hand side is known as
'debit side' and right hand side is known as 'credit side'. Amounts entered on
the debit side (left hand side) are called debits and amounts on the credit side
(right-hand side) are called credits. 'To debit' means to make an entity in the
left-hand side of an account' and 'To credit' means to make an entry in the
right-hand side of an account. The words debit and credit have no other meaning
in accounting. Abbreviation used for debit is Dr. and for credit Cr.
Rules of Debit and Credit (Equation Based)Dual aspect concept in accounting
implies that every accounting transaction would be expressed by a debit amount
and an equal and opposite credit amount. Thus, the rule that for each
transaction debit amount must equal the credit amount has absolutely no
exception. The equality of debits and credits may be expressed in the form of an
equation:
Debit = Credit
In the previous chapter we
discussed accounting equation:
A-L = P
i.e., Assets-Liabilities =
Proprietor's Funds or Capital
If each account was to be
considered in isolation it would make no difference whether increases were
recorded on the debit side or on the credit side but since the accounts are
inter-dependent therefore a system of recording increases and decreases on the
two sides had to be fixed. Traditionally or conventionally increases in asset
accounts are recorded on the debit side while increases in liabilities and
capital are recorded on the credit side. The above rule ensures that when
account balances are totaled will confirm to the accounting equation discussed
above. It gives rise to the following rules: .
1. Increases in asset accounts are debits, decreases are credits.2. Increases in liability accounts are credits, decreases are debits.3. Increases in Owner's equity accounts are credits, decreases are debits.Total classes of accounts
maintained by any business will include the accounts relating to expenses,
losses, revenues and profits in addition to assets, liabilities and proprietor's
funds. Rules of debit and credit regarding assets, liabilities and capital have
been stated above and the rules for expenses / losses and revenues/ profits can
be derived from the same.
4. Increases in expenses/ losses accounts are debits.Since the expenses and losses when
incurred and suffered lead to reduction in the capital and decreases in owner's
equity accounts are debits, therefore increases in expenses and losses accounts
are Debits.
5. Increases in revenues/ profit accounts are credits.Since the revenues and profits when
earned will lead to increase in the capital and increase in owner's equity
accounts are credits, therefore increases in revenue and profits accounts are
credits.
The rules of debit and credit
discussed above are based on accounting equation technique. Traditional rules of
debit and credit are based on classification of accounts. These rules in
practice give the same results and operate in the same manner. These
merely stale the position in a different
way. |
VAT Ready
GST Ready
Download
More Details
Buy Now
Note for International VAT USers and GST Users in India
Many business use services of Tax Consultants and Chartered Accountants for filing the Tax Return and the tax return of the software is not used. To assist such activity you can export all reports from the software to MS Excel or MS Word and submit it to your tax adviser for financial figures for the business . The software will perform all Inventory Control, Vouchers, Nominal Ledger Accounts along with Working/Trading and Profit & Loss account that will give you all figures ready for export for filing Tax Return. As soon as you are sure about the changes you want in the visual interface and printing regarding your GST requirements we will modify the software software as per your GST requirements. To get any of the off-the-shelf software modified for visual interface and printing please Contact Us Now. We will carry out all required customization for GST as per your requirements in the existing software in professional and timely manner . For any required customization as per GST in any of the off-the-shelf software, please contact us now. We will carry out required customization for GST as per your requirements in the existing software at nominal additional charges. Give us details of required customization for a man-hour or work estimate. For official reference to GST refer to following links:GST (Goods and Service Tax) Circular by Central Board of Excise and Customs (CBEC), Department of Revenue, Ministry of Finance, Government of India. Finance Act 2016 of Government of India HSN codes for Goods and Service Tax (GST) in India Central Board of Excise and Customs - HSN Codes Circular by CBEC, Government of India - About HSN Codes.
Central Goods and Services Tax (CGST) Rules, 2017 Draft government Approved Format Under Goods and Services Tax - Invoice Rules What is GST Compliant Business? What are the specific mandatory fields in an GST compliant invoice? Why the invoice an important financial instrument? What are Registered and Un-Registered Dealers? There is a lot for your business to catch up on those links along with online tax filing and registration for trading. Give us the details of required work you want in the off-the-shelf VAT accounting system and we shall make it GST compliant invoicing and accounting for your business at nominal additional charges. Cheers. Happy Accounting. If you want to know the details of for making VAT/CST system compliant to GST system: Standard rate of $15 per man hour shall be applicable for making any of off-the-shelf VAT based accounting software systems into CGST/SGST Compliant Accounting. Give the details of customization required in any of our off-the-shelf VAT accounting systems made for various business to get a quote of additional charges. See demo of software on website. See official Indian Government CGST/SGST Specification on the panel above here. Click for more information on Value Added Tax (VAT). Free Download of Full Featured Software - Try Full Featured Software Before Order - Time Limited 30 days Full Featured Version of these software are available for download from our website www.freeaccounting.in. HiTech Billing, Accounting Software Off-the-Shelf versions are available for Business, Traders, Industry, Hospital, Hotel, Petrol Pump, Medical Store & Distributor, Automobile or Motorcycle Dealers, Newspaper or Magazine Publishers, VAT Accounting & Billing and Commodity Brokers. | ||||||
Send Email Now
