Basic Rules of Accounting entries are the foundation stone to learn accountancy and software to manage your account. Without learning Basic Rules of Accounting entries, it will be difficult to manage accounts no matter how powerful accounting software you are using .
We have already seen Basic Rules of Accounting entries and groups in tally . Understanding basic rules of accountancy is a necessary process and one should take trouble to go through the basic rules of accounting before starting professional course like Tally.ERP 9. Without learning Basic Rules of Accounting entries, you are building a house without knowing about the foundation stone! I have seen so many users who straithly starts working on Tally.ERP 9 without caring of basic and latter of they look for support here and there and mess up their accounts. I have posted an another article on how to start writing books of account will also help you to understand basic rules of accounting entries.
Basic Rules of Accounting entries:
Like any other principles, Basic Rules of Accounting entries contains certain rules which helps you how to apply those rules while passing an entry in the Accounts.
Accounts are broadly categorized into 3 Accounts :
2)Goods/Assets Accounts and
3)Profit/Loss or Income/Expenses Accounts
In the previous article, we have seen the classification of accounts under the above mentioned 3 broad categories.
This classification is very necessary to understand the rules of ‘Debit or Credit’ for any transaction:.
So, what are the Basic Rules of Accounting entries ?
A) Individual Accounts
In every individual accounts, there is two possibilities.
One is gainer and another is loss er OR we also can say
One is giver and another is receiver
the THUMB RULE for Individual Account IS THAT
Credit the person who is giving and debit the person who is receiving.
Suppose, you have given cash rs. 1000 to Mr. X, then in your books of account you have to ”
Debit Mr. X Rs. 1000
Similarly In the books of account of Mr.X he will credit your account by Rs. 1000
For your kind information, the entry is not yet complete as we have seen only one rule yet.
B) Goods/Assets Account : The item of which we are trading is called Goods and item which we are purchase for use of the business is called Assets. For e.g. table and chairs are goods for a dealer who is into trading of manufacturing of furniture while office premises will be his assets.
This rule is very simple.
” Debit what ever comes in
Credit whatever goes out ”
look to the above example cash is going out so, cash will be credited.
So, let’s complete the above entry
Debit Mr. X Rs. 1000.00
Credit Cash Rs. 1000.00
Similarly in the books of account Mr. X will pass entry as follows
Debit cash Rs. 1000.00 (because cash comes to him)
Credit your account with your name
Similarly ABC and Company issues a cheque of Rs. 15000 drawn on bank of Baroda to Mr. bimal kumar then entries in the books of account of M/s. ABC & Co. will be as follows:
Debit Bimal Kumar Rs. 15000.00
Credit Bank of Baroda Rs. 15000.00
Basic Rules of Accounting entries are easy to understand and once you understood it, you will be able to learn the Accountancy and Tally.ERP 9 very easily.