Mind-it rules of accounting

1) Accounting follows a very simple double entry system which states that every accounting transaction has two sides — debit and credit. As addition (+) and subtraction (-) are to mathematics, so are debit (dr.) and credit (cr.) to accounting.

2) Every business has an asset and liability, where asset stands for anything the business owns and liability stands for anything the business owes.

3) Assets have a debit opening balance and liabilities have a credit opening balance (This rule applies in every accounting format that has a debit and credit side.)

4) Three types of accounts on the basis of which accounting entries are done:

a) Real account — debit what comes in, credit what goes out. (For ex.: Cash, Furniture, etc.)

b) Personal account — debit the receiver, credit the giver. (For ex.: Debtors account, Creditors account, etc.)

c) Nominal account — debit all expenses and losses, credit all incomes and gains. (For ex.: Rent account, discount account, etc.)