It contains information regarding what is an account what is debit and credit what are the rules of Debit and Credit. balancing and its process and its significance

2. Meaning of an Account
 It is a record of all business transactions related to a particular person or item.
 It records the amount of transactions along with their effect and direction.
 It is divided into two parts and presented in a T format, where the left side is known as debit and the right side is
known as credit. T-shaped account represents debit and credit sides as (Dr.) and (Cr.) respectively.
 It is debited by entering the amount on the left side of an account and is credited by entering the amount on the
right side of an account.
 Format and layout of an Account:
Date Particulars J.F. Amount Date Particulars J.F. Amount
Date of
Transaction
Name of the
other Account
Page or
reference
number of the
Subsidiary
Book
Amount of
transaction
Date of
Transaction
Name of the
other Account
Page or
reference
number of the
Subsidiary
Book
Amount of
transaction
Dr. Cr.
Name of the Account

3.  Debit refers to the left side of an account and credit refers to the right side of an account.
 In abbreviated form Dr. stands for debit and Cr. stands for credit.
 An item recorded on the debit side of an account is said to be debited to the account.
 An item recorded on the credit side of an account is said to be credited to the account.
 Both debit and credit may represent either increase or decrease depending upon the nature of the
account. The rules of debit and credit also depends on the nature of account.

4.  As per Double Entry System of accounting,
every business transaction has two aspects.
One of them is receiving or incoming aspect
known as the debit aspect and the other is the
giving or outgoing aspect known as the credit
aspect.
 Based on these two aspects under Double Entry
System of Accounting, necessary Rules of Debit
and Credit are framed based on the nature of
various accounts in order to correctly decide
when to debit the account and when to credit the
account to ensure the correct effect and
treatment for a particular transaction.

5.  A balance of an account is the difference between the total of its debit and credit sides.
 If the total of debit side is more than the total of credit side, the account is said to have a debit balance.
 If the total of credit side is more than the total of debit side, the account is said to have a credit balance.

6.  Total the two sides (i.e., Debit and Credit) of the account.
 Calculate the difference in totals of the two sides. The difference is the balance.
 Enter the difference in the side with shorter total. Now the total of two sides will match.
 If the credit side is shorter, then the amount is entered on the credit side by writing ‘By
Balance c/d’ in the Particulars column.
 It is carried forward by writing in the debit side ‘To Balance b/d’, it being a debit
balance.
 If debit side is shorter, then the amount is entered on the debit side by writing ‘To
Balance c/d’ in the Particulars column. It is carried forward by writing on the credit
side ‘By Balance b/d’, it being a credit balance.

7.  : A credit balance in this account means the amount due
to the owner of the business.
 Balance in Bank Loan or Suppliers Account: A credit balance in these accounts
means the amount payable by the business to the Bank or the Supplier.
 Balance in Cash or Debtor’s Account: A debit balance in these accounts means the
amount receivable by the business.
 Balance in Discount or Interest Account: A credit balance in Discount or Interest
Received Account means an income earned by the business and a debit balance in
Discount or Interest Allowed Account means an expense incurred by the business.