Rules of Debit and Credit

Expenses

 

• An increase in expenses will be debited.

For example: Paid rent expense for the month in cash Rs. 6000

 

 

Sales Return

 

When a company sells goods to customers and the customers return goods to the company because of any defect, then such goods are sales return. Sales return is always debited.

For example: George sold goods for Rs. 8000 but the goods were returned back by the customer.

 

 

Purchases Return

 

Sometimes, company purchase goods which are not according to their specification or contain some defects due to which company returns the goods to the seller. Such goods are called purchases return and they are always credited.

For example: Steve purchased goods for Rs. 7000 but returned them back because they were damaged. 

 

 

Income

 

Whenever the company earns profit, the amount of profit is always recorded on the credit side of journal.

 

 

Losses

 

Whenever a company incurs loss, the amount of loss is always recorded on the debit side of journal.