Debit means left side and credit means right side. Look at exhibit 2.7 and discu
ID: 2411224 • Letter: D
Question
Debit means left side and credit means right side. Look at exhibit 2.7 and discuss in detail in your own words of how debits and credits affects the major accounts in financial accounting. Use account titles such as assets, liabilities, equity,and phrases such as increases, decreases, and normal balance
omdonent Accounts Equity Assets LiabilitiesOwner, CapitalOwner, WithdrawasRev Revenues Dr. for C for Dr. for Cr. for decreases increases decreases increases increases decreases Dr. for Cr. for Dr. for Cr for Dr. for Cr. for ncreases decreases decreases increases increases decees Normal Normal NormalExplanation / Answer
There are three types of Accounts in Financial Accounting: (1) Real Account- comprise of Asset and Liabilities (2) Nominal Account- comprises of Income and Expenses and gains and losses (3) personal Account- comprises of personal account of individual or corporations
There are three rules of Accounting
1- For real accounts - What comes in Debit means Assets what goes out liabilities - Liabilities
2- For Nomial Accounts- Expenses and losses are debit while income and gains are credit
3- For Personal Accounts - all debtors are debit while all creditors are credit balance
In the case of Increase of assets, Assets account would be increased while if assets are sold it means asset account would be credited and balance would be reduced.
In the same way if expenses and losses would be increase it would be debited and will if expenses and losses would be decreased it would be credited
If income will increase it would be credited and will increase the owners capital and if it decreases it would be debited and decrease owners capital.
any increase in owners capital would be credited while any decrease in owners capital would be debited
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