1. At first we will see, which accounts are affected by the transaction. For example
“Purchased furniture for cash Rs. 50000. Two accounts are involved.
Furniture A/c
Cash A/c
2. Then we will see to which head these accounts belong.
From the above example, both accounts are from the head “Assets”.
3. Then we will see, they have increased or decreased.
From the above example:
Furniture A/c has increased and cash A/c has decreased, that shows:
One asset is increasing and the other is decreasing.
4. Then by applying rules of Debit and Credit, we will enter the transaction. Furniture A/c is increasing. When Asset increases it is debited (Dr.). As furniture is an asset so it will be debited.
Cash A/c is decreasing. When asset decrease they are credited (Cr.)
1. Furniture A/c Cash A/c
2. Asset Asset
3. Increase Decrease
4. Debit Credit
“Purchased furniture for cash Rs. 50000. Two accounts are involved.
Furniture A/c
Cash A/c
2. Then we will see to which head these accounts belong.
From the above example, both accounts are from the head “Assets”.
3. Then we will see, they have increased or decreased.
From the above example:
Furniture A/c has increased and cash A/c has decreased, that shows:
One asset is increasing and the other is decreasing.
4. Then by applying rules of Debit and Credit, we will enter the transaction. Furniture A/c is increasing. When Asset increases it is debited (Dr.). As furniture is an asset so it will be debited.
Cash A/c is decreasing. When asset decrease they are credited (Cr.)
1. Furniture A/c Cash A/c
2. Asset Asset
3. Increase Decrease
4. Debit Credit
So entry will passed as
Furniture A/c 50000
To Cash A/c 50000
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