Sanjeev Giri
CHAPTER-6
RULES OF DEBIT AND CREDIT
Accounts have been classified in two ways-
a. Traditional approach [ English approach]
b. Modern approach [Accounting equation approach or American approach]
A. Traditional Approach
Under this approach, accounts are classified into two groups as shown below-
A.1 PERSONAL ACCOUNT- account that relates to the person i.e., individual, firms,
companies, debtor or creditors, etc.
Personal accounts can be classified into three categories-
1. Natural personal accounts- the person who is created by the god will be counted under
this. Ex- Ram’s account
2. Artificial personal accounts- this includes accounts of corporate bodies or institutions.
Ex-the account of a limited company, account of a club or corporative society, etc.
3. Representative personal accounts- these are accounts which represent a certain person
or a group of persons. Ex-rent is due to the landlord, prepaid rent account, etc.
Rules of debit and credit - debit the receiver, credit the giver.
A.2 IMPERSONAL ACCOUNT- account which are not personal such as machinery account,
cash account rent account, etc.
Impersonal account is classified into two categories-
1. Real account- account which relates to tangible or intangible assets of the firm.
Ex- land, building, investment, stock etc.
Rules of debit and credit – debit what comes in, credit what goes out
2. Nominal account- accounts which relates to expenses, losses, gains, revenue, etc.
Ex- interest paid account, salary account, etc.
Rules of debit and credit – debit all expenxex and losses, credit all incomes and gains
Rules of debit and credit [Traditional classification] at a glance
Types of account Account to be debited Account to be credited
1. Personal account Receiver Giver
2. Real account What comes in What goes out
3. Nominal account Expense and loss Income and gain
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Sanjeev Giri
B. Modern Approach
Under this approach all the accounts are classified into the following five categories-
1. Assets accounts- assets accounts are those accounts which relates to the economic
resources of an enterprise such as land and building, plantand machinery, furniture,etc.
Rule if debit and credit – debit the increases and credit the decreases
2. Liability accounts- liability accounts are accounts of lenders, creditors for goods,
outstanding expenses, etc.
Rule of debit and credit – debit the decreases and credit the increases
3. Capital accounts- these are the accounts of proprietors/partners who have invested
amount in the business. It includes both capital and drawing account.
Rules of debit and credit – debit the decreases and credit the increases
4. Revenue accounts- these are accounts of income and gains. Ex-sales, discount received,
interest received, bad debts recovered, etc.
Rule of debit and credit – debit the decreases and credit the increases
5. Expenses accounts- these are the accounts of expenses or losses incurred in carrying the
business. Ex-purchases, wages, salaries, depreciation, etc.
Rule of debit and credit – debit the increases and credit the decreases
Rules for debit and credit [Modern Approach] at a glance
Types of account Accounts to be debited Accounts to be credited
1. Assets accounts increase decrease
2. Liability accounts decrease increase
3. Capital accounts decrease increase
4. Revenue accounts decrease increase
5. Expenses accounts increase decrease
Mob NO 8860705297
