Golden rules of accounting refer to a set of pre-defined principles which guides the sequential way of recording the transactions using double entry system of bookkeeping. With the above understanding, let us introduce the golden rules of accounting. Voila! You just recorded an accounting transaction even without looking at the golden rules of accounting. Here, you are receiving a computer so it should be debited, and cash should be credited since it is going out. To summarize - Debit is all about incoming/deposits and Credit is all about outgoing/withdrawal.įor example, you purchased a computer by paying 25,000 by cash. Instead of beginning with golden rules of accounting, let me register debit and credit as shown in the table.įrom the above table, it’s clear that it is neither a theory nor a puzzling topic anymore - it’s just logic and reasoning. Let’s clear the confusion once and for all!
By the time I would settle my understanding on golden rules of accounting: debit and credit, one or the other scenarios would again lead me back to zero and start my understanding afresh.Īfter following some of logics below, I settled my understanding on debit and credit and after that, I got it right every time. Got stuck in figuring what to Debit and Credit? Yes, like some of you, even I used to get puzzled as well in my early days. Understanding Debit and Credit just got Easier
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