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Basic Formula of Account and About Debit and Credit


Your Country :: INDIA

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 Sir, Plz help me regarding this question. What is the base formula of accounting on which accounts is operating? And one more thing is how anything is taken by a company then that balance is credit and anything goes out from the company that balance is debit.? Plz help me through any suitable example. I obliged to you for whole life. This question is too confusing me since two months. No any
person in my contact having a suitable answer of this question.

Category :: Education

Answer :: 

Dear, Abhishek kumar, you have asked good questions. I am trying to answer your questions one by one.

1. Dear basic formula of accounting on which accounts is operating is just give and take theory. Let me explain of purchase and sale. You have bought an good on credit. your account will keep by seller because he has to take. You have to keep his account because you have to show proof that you bought only limited goods on credit and second you have to return some default. So, you have to give money, so, you keep accounts. All the transactions are just give and take theory will apply. So, we keep accounts.

2. Debit and credit can easy explain with a simple example. You are human being. From morning to evening, you will some good work and it may be, some bad works will be done by you which you only know. For example, in the time of construction, in my presence, there are lots of ants were killed. I can stop it but I could not. God has record our whole account of our evil works and good works. Our evil works will be debit in the account of God. God is just like bank. Our good work will credit in God's account. Now, after our death, account will close by calculating net balance. It can only possible by deducting our credit balance out of debit balance with bank. Net balance will we consume in next birth.

Now, it will not good, we also keep the account of our expenses, incomes, assets and liabilities when God has kept and no one can blame of happiness and pain on God because he is good accountant. If we will debit all the expenses and bought assets and decrease in our liabilities and credit all the incomes, decrease in the asset and increase in the laibilities, we will calculate what is the balance in our hand. It will be net profit or loss and it will be excess of assets over liabilities or excess of liabilities over assets. That is the reason, we keep everything in debit and credit.


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Accounting ! Answers: Basic Formula of Account and About Debit and Credit
Basic Formula of Account and About Debit and Credit
Accounting ! Answers
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