oday and tomorrow Chapter 2 Discussion Analyzing and Recordi

oday and tomorrow Chapter 2 Discussion: Analyzing and Recording Transactions- Due Chapter 2 Discussion: Analyzing and Recording Transactions - DueJun 15, 2018 11:30 PM @ Principles of Accounting | Section 01W Summer 2018 ?? DEBIT means Left side and CREDIT means Right side. Go to Exhibit 2.7 in the textbook and discuss in detail in your own words the how debits and credits affects the major accounts in financial accounting. Use Account titles such as Assets, Liabilities. Equity and phrases such as increases, decreases and Normal balance. Chapter 2 Discussion: Analyzing and Recording Transactions O Due June 15 at 11 30 PM

Solution

Debit and Credit these two terms are often used in Financial Accounts and are very much important in Financial Accounting system. Debit is a word which comes from a Latin word ‘Debere’and Credit comes from a Latin word ‘Credere’. In Financial accounting we use debit and credit to indicate certain situations of assets, liability, expenses and incomes.

For assets or Real accounts, Debit means increase in assets and Credit means decrease in assets. If any such transaction happens for which we need to increase the assets value, assets account is debited, and if we need to decrease the assets value then, assets account is credited.

For liability the thing is totally the reverse as it was in case of assets. If we need to increase the value of any a liability, that liability account is credited and if we need to decrease the value of liability, liability account is debited by that amount.

In case of incomes, Credit means increase in incomes and Debit means decrease in incomes. In case of Expenses, debit means increase in expenses and credit means decrease in expenses.

Account end balances are also presented with the term debit and credit. For balances of assets, debit means positive or favourable balance and credit means negative balance. For balances of liabilities, debit means negative balance and credit means positive balance. For balances of expenses accounts, debit means positive balance and credit means negative balance. For income account balances, debit means negative balance and credit means positive balance.

So, understanding the rules of debit and credit is very much important in financial accounting. We need to when to debit an account and when to credit. The accuracy of the financial accounting depends on this classification of accounts in terms of debit and credit.