বুধবার, ২৮ অক্টোবর, ২০১৫

Philosophy of Debit and Credit of Accounting

Since a transaction is an exchange of values, it is composed of two elements, both of which must be recorded in order to make a complete financial record. In any transaction the presence of the dual amounts is evident in the fact that on one hand a commodity, right, or service is received and on the other hand a commodity, right, or service is given up. Every transaction involves only the three balance sheet elements, assets, liabilities, and proprietorship, causing increase and decrease in three elements.

The effects of transactions on the financial records, therefore, consist only of assets changes, liability changes, and proprietorship changes or combinations thereof. Any changes in the income and expense are basically proprietorship changes whose ultimate effects are reflected in to balance sheet.

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