Rules of Debit and Credit

Debit

An increase in assets or a decrease in liabilities on a company's balance sheet. An expense, or money paid out from an account

Credit

An entry that shows that money has been received.

Personal Accounts

Debit the receiver, credit the giver.

Real Accounts

Debit what comes in, credit what goes out.

Nominal Accounts

Debit all expenses, Credit all income.

Examples of Personal Account

Natural Person, Artificial Person, Representative Personals.

Examples of Real accounts

Tangible and Intangible assets

Examples of Nominal Accounts

All revenues and expenses.

Account balance that is not carried over to the next year.

Nominal Account balance.

Nominal means:

Temporary

Nominal to Representative Personal Account

‘Outstanding’ Salary

‘Prepaid’ Rent

Capital Account

Capital = Personal Account

Bank Account

Bank Account = Personal Account

Wages and salaries

Expense account = Nominal accounts

Rent Received

Bank (Personal) debit the receiver

Rent (Nominal) credit the income

Purchase goods on credit

Creditor (Person) credit the giver

Purchase (Nominal) debit the expense

Sales revenue received in cheque

Bank (Personal) debit the receiver

Sales (Nominal) credit all income