Recording Debits and Credits in Bookkeeping

Companies are required to maintain different books for keeping the bookkeeping accounts related to business in an orderly way. In order to study more about the journal, certain related terms along with the financial rules and procedure of bookkeeping accounting must be known. Financial transactions involving the receipt and the payment of cash affect the cash balance as well. Receipts will normally increase the cash balance and payments will decrease the cash balance of a company. The opening as well as closing balances of the capital amount can be rightly calculated by preparing the statement of affairs. Instead of having to do the increasing or decreasing of the balance part, after each and every transaction bookkeepers may place all the increases together in one column and all the decreases collectively in another column. Now, one may find the balance as and when required. It will save time and is much more convenient than the other method. The simple form of a bookkeeping account is also termed as a T-account. Any increase in the cash will be listed on the left hand side of the page and the decreases will be indicated on the right hand side. Afterwards, the closing balance will be ascertained by subtracting the total payments from the total indicated on the left hand side.

Debit and credit in bookkeeping is divided into two parts. The left hand side is known as debit side and the right hand side is identified as credit side.The figures of amounts entered on the debit side or the left hand side are called debits and the figures of amounts indicated on the credit side, also known as the right hand side, are called credits. ‘To debit’ means to make an entry on the left side of the account and ‘To credit’ means to make an entry on the right side of a person’s or company’s account. The abbreviation used for debit is Dr., and for credit, it is Cr. The dual aspect concept in bookkeeping simply implies that every bookkeeping transaction would be expressed by a debit amount along with an equal and oppositely placed credit amount. In that way, the rule which states that for each and every transaction the debit amount must equal the credit amount; and, this has got absolutely no exception. If each account is to be considered as separate entities, it would make no difference whether the increases had been recorded on the debit side or on the other side. However, since the various accounts are inter-dependent a proper system that takes care of properly recording the increases and decreases on the two sides had to be predetermined. The rule ensures that when the account balances are added together, it will conform to the accounting equation. Since the revenues and profits as and when earned would lead to an increase in the capital, and as the proportionate increase in the owner’s equity accounts are classified as credits, any increases in terms of revenue and profits are rightly called credits.

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