Accounting principles knowledge is the first step to Accounting Career. An understanding of the Accounting principles Guarantees a success in the Accounting Career
We have already read about basic of accountancy and some thumb rules relating to Accounting principles
Concept of Accounting Principles
As This is a world wide fact, there are 3 Thumb Rules in Accountancy related to Accounting principles and in our earlier article, we have already read about the 1st Rule of Individual Accounts. now let’s see further understanding of Accounting Principles.
Rule No.2) Goods/Assets Account
Debit whatever comes in
Credit whatever goes out
All, you need is just remember this rule and apply a common understand what is coming in your business and what is going from your business! Once you understand this, you will be able what should be debited and what should be credited!
If you sold goods to Mr. Y on credit than here two accounts are involving in this transaction
One is Individual Accounts and other is goods account
So, debit Mr. Y and credit goods sales account for the amount of transaction
Now, look to the 3rd Accounts “Income and Expenses of profit and loss account
The rule for these kind of account is :
“Debit the expenses/loss and
Credit the Income/Profit Account”
If you pays Rs. 1500 towards purchase of various stationery then you have to debit the stationery account and credit the cash account.
More about Accounting Principles
In my next article I will classify the items comes generally under the three broad categories e.g.
1) Individual Accounts 2) Goods & Assets Accounts and 3) Income/Expenses or Profit and Loss Account
Accounting principles |The First steps in Accountancy
Once you understand the Accounting Principles, working with Tally will be easy for you. Try to create a company in Tally as per the instructions given in step by step company creation.