the total liabilities and capital. . Rules of debit and credit : An account is divided into two sides. The left side of an account is known as debit and the credit.
The rules of debit and credit depend on the nature of an account. Debit and Credit both represent either increase or decrease, depending on the nature of an account. These rules are summarised as follows : Name of an account Debit Credit Increase Decrease Liabilities Decrease Increase Decrease Increase Revenues Decrease Increase Expenses increase Decrease . Books of Original entry : The transactions are first recorded in these books in a chronological order.
Journal is one of the books of original entry. The process of recording entries in the journal is called journalising . . Ledger : A book containing all accounts to which entries are transferred from the books of original entry.
Posting is process of transferring entries from books of original entry to the ledger. Questions for Practice Short Answers . State the three fundamental steps in the accounting process. .
Why is the evidence provided by source documents important to accounting? . Should a transaction be first recorded in a journal or ledger? Why?
. Are debits or credits listed first in journal entries? Are debits or credits indented? .
Why are some accounting systems called double accounting systems? . Give a specimen of an account. .
Why are the rules of debit and credit same for both liability and capital? . What is the purpose of posting J.F numbers that are entered in the journal at the time entries are posted to the accounts. .
What entry (debit or credit) would you make to: (a) increase revenue (b) decrease in expense, (c) record drawings (d) record the fresh capital introduced by the owner. . If a transaction has the effect of decreasing an asset, is the decrease recorded as a debit or as a credit? If the transaction has the effect of decreasing a liability, is the decrease recorded as a debit or as a credit?
Long Answers . Describe the events recorded