08-07-2009, 04:49 PM
Basically there are five classes of accounts.
1) Assets
2) Capital
3) Liabilities
4) Revenue
5) Expenses
The debit and credit is called the double entry system. It ensures that errors are minimized. The accounting equation is Assets = Capital + Liabilities.
It means that if you dispose all your assets you will be able to pay off the creditors (liabilities) and take the rest which belongs to you.
The principle of Double entry is
when assets increase they are debited.
when expenses increase they are debited.
when capital increases it is credited
when liabilites increase it is credited
when revenue increases it is credited.
The double entry system follows that for every debit entry there has to be a credit entry which balances it and vice versa.
Hopefully it will give you the basic idea.
1) Assets
2) Capital
3) Liabilities
4) Revenue
5) Expenses
The debit and credit is called the double entry system. It ensures that errors are minimized. The accounting equation is Assets = Capital + Liabilities.
It means that if you dispose all your assets you will be able to pay off the creditors (liabilities) and take the rest which belongs to you.
The principle of Double entry is
when assets increase they are debited.
when expenses increase they are debited.
when capital increases it is credited
when liabilites increase it is credited
when revenue increases it is credited.
The double entry system follows that for every debit entry there has to be a credit entry which balances it and vice versa.
Hopefully it will give you the basic idea.
