Debit and Credit are most important terms in Accountancy. The entire accounting system depends on Debit and credit. Every transaction must has debit and credit terms. Some Transactions may have more than two ledgers at debit side and only one ledger at credit side. And some more transactions may have more than two ledgers at credit side and only one ledger at credit side. And some may have one ledger at Debit side and one leger at credit side. Overall, every transaction must have debit and credit.
JOURNAL ENTRY FORMAT
________________________________ A/c – Dr xxxxxx
To___________________________________ A/c – Cr xxxxxx
(Narration : _______________________________________________________________)
We have to know the Ancillary rules of debit and credit to understand these two terms.
ANCILLARY RULES OF DEBIT AND CREDIT
| S.NO | NATURE OF ACCOUNT | DEBIT | CREDIT |
|---|---|---|---|
| 1 | Assets | Increases | Decreases |
| 2 | Liabilities | Decreases | Increases |
| 3 | Expenses | Increases | Decreases |
| 4 | Incomes | Decreases | Increases |
| 5 | Purhcase | Increases | Decreases |
| 6 | Sales | Decreases | Increases |
What are the settings to enter vouchers in
Double Entry mode in Tally Prime ?
- Gateway of Tally –> Transactions –> Vouchers
- Press CTRL + H to change voucher mode and select “Double Entry” mode in it, and select “voucher mode” for purchase, sales, debit note and credit note vouchers,press enter.
- Press F12 for configuration , Use Dr / Cr instead of To / By during entry : Yes
(If this option is enable, terms To / By will deactivate. If this option disabled terms Dr / Cr will deactive)
To is the Credit and By is the debit. Choose the option as per your need and requirement
Enter the following transactions in Double entry mode in Tally Prime for the financial year 2021-2022
Capital Account of Ritwika – ₹ 5,00,000 /- On April 1st 2021
SOLUTION:
In this transaction, Capital amount is being accepted in the form of Cash. Ritwika is the owner of company. And Company has to pay the capital amount in a certain period to the owner. So, Capital Account is a liability to company. Here, Liability is increasing. So, Capital a/c of Ritwika is Credit. And at the same time, company’s cash account is an Asset. It is increasing. So cash Account is Debit.
The total entry is
Cash A/c – Dr 5,00,000
Capital A/c of Ritwika A/c – Cr 5,00,000
VOUCHER :
- Receipt is the voucher for capital account transaction. F6 is the key for receipt voucher.
- Group for Capital A/c of Ritwika is Capital account
Salaries paid in Cash – ₹ 19,000/- on April 2nd 2021
SOLUTION:
Salaries is the expenses to company and it is increasing. According to the ancillary rules, expenses is debit to increase. And Company is paying salaries through cash. So, Cash balance is decreasing. Cash is an asset and it should be credit to decrease.
So, the overall journal entry is
Salaries A/c – Dr 19,000
Cash A/c – Cr 19,000
- Indirect expenses is the group for salaries account
- Voucher is Payment and its key F5
Cash Purchases – ₹ 20,000 on May 1st 2021
In the above transaction, we are buying goods and paid the amount in Cash. So, Purchase ledger value is increasing. To increase the purchase value it should be debited according to the ancillary rules. And cash balance is decreasing it should be credited according to the asset.
So, the journal entry is :
Purchases A/c – Dr 20,000
Cash A/c – Cr 20,000
- Purchase account is the group for ledger Purchase A/c
- Voucher to record is Purchase (F9)
Electricity Charges Payable – ₹ 3,000
Our company electricity charges is yet to be paid. Payable expenses are liability to our company. Liability is should be credited to increase its ledger balance. And electricity charges is an expenses it should be debited to increase.
So, the total entry is
Electricity Charges A/c – Dr 3,000
Electricity charges payable A.c – Cr 3,000
- The accounting group for electricity charges is CURRENT LIABILITIES
- Payable entries should be record in Journal Voucher and its key is F7
