BACK TO BASICS: DEBITS AND CREDITS
"Going back to the basics strengthens your foundation".
All the business transactions are either tracked as debits or credits.
Three golden rules of accounting:
Personal Accounts: Debit the receiver; credit the giver
Real Accounts: Debit what comes in, credit what goes out
Nominal Accounts: Debit all expenses and losses, credit all incomes
and revenues
Journal entry is recording of a transaction. A transaction is recorded as debits
and credits. Each debit to an account must be accompanied by a credit to
another account. Luca Pacioli the "Father of Accounting" said that you should
not go to sleep until your debits equalled your credits.
Assets = Liabilities + Owners equity. An increase in the value of assets is a
debit to the account, and a decrease is a credit. An increase in liabilities or
owners equity is a credit to the account, and a decrease is a debit.