Lakhasly

c asset, liability, or owner's equity item.The double-entry system for determining the equality of the accounting equation is much more efficient than the plus/minus proDEBIT AND CREDIT PROCEDURE Remember that each transaction must affect two or more accounts to keep the basic accounting equation in balance.Debits and Credits The terms debit and credit are directional signals: Debit indicates left, and credit indicates right.They indicate which side of a T account a number will be recorded on. Entering an amount on the left side of an account is called debiting the account.We commonly abbreviate debit as Dr. and credit as Cr. Having debits on the left and credits on the right is an accounting custom, or rule.In other words, for each transaction, debits must equal credits in the accounts.The equality of debits and credits provides the basis for the double-entry system of recording transactions. For example, Softbyte (the company discussed in Chapter 1) would have separate accounts for Cash, Accounts Receivable, Accounts Payable, Service Revenue, and Salaries Expense.

c asset,
liability, or owner’s equity item. For example, Softbyte (the company discussed in
Chapter 1) would have separate accounts for Cash, Accounts Receivable, Accounts
Payable, Service Revenue, and Salaries Expense. In its simplest form, an account
consists of three parts: (1) a title, (2) a left or debit side, and (3) a right or credit side.
Because the format of an account resembles the letter T, we refer to it as a T account.
Illustration 2-1 shows
the basic form of an account.
The T account is a standard shorthand in accounting, which helps make clear the
effects of transactions on individual accounts.
Debits and Credits
The terms debit and credit are directional signals: Debit indicates left, and credit
indicates right.They indicate which side of a T account a number will be recorded
on. Entering an amount on the left side of an account is called debiting the
account. Making an entry on the right side is crediting the account. We commonly
abbreviate debit as Dr. and credit as Cr. Having debits on the left and credits on
the right is an accounting custom, or rule. This rule applies to all accounts. When
the totals of the two sides of an account are compared, an account will have a debit
balance if the total of the debit amounts exceeds the credits. An account will have a
credit balance if the credit amounts exceed the debits.
DEBIT AND CREDIT PROCEDURE
Remember that each transaction must affect two or more accounts to keep the basic
accounting equation in balance. In other words, for each transaction, debits must equal
credits in the accounts.The equality of debits and credits provides the basis for the
double-entry system of recording transactions.
In the double-entry system the dual (two-sided) effect of each transaction is recorded in
appropriate accounts. This system provides a logical method for recording transactions.
It also helps ensure the accuracy of the recorded amounts. The sum of all the debits to
the accounts must equal the sum of all the credits.
The double-entry system for determining the equality of the accounting equation
is much more efficient than the plus/minus pro