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why do assest accounts have a normal balance which is debit and liabilites and stockholders
equity have a normal balance which is credit?
Solution
It is because of the three golden rules set by the accounting principles:-
.
1)Debit what comes in , credit what goes out.
.
2)Debit the receiver, credit the giver.
.
3)Debit all expenses and losses, credit all incomes and gains.
.
When we purchase an asset it comes in our business- so we debit asset. So assets have a debit
balance.
.
When we receive money from shareholders or loan from third party we credit them because we
know -credit the giver.So. Liability and shareholder equity have a credit balance.
why do assest accounts have a normal balance which is debit and liabil.docx

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why do assest accounts have a normal balance which is debit and liabil.docx

  • 1. why do assest accounts have a normal balance which is debit and liabilites and stockholders equity have a normal balance which is credit? Solution It is because of the three golden rules set by the accounting principles:- . 1)Debit what comes in , credit what goes out. . 2)Debit the receiver, credit the giver. . 3)Debit all expenses and losses, credit all incomes and gains. . When we purchase an asset it comes in our business- so we debit asset. So assets have a debit balance. . When we receive money from shareholders or loan from third party we credit them because we know -credit the giver.So. Liability and shareholder equity have a credit balance.