KAAFU ATOLL EDUCATION CENTRE, K. Thulusdhoo
BUSINESS STUDIES – GRADE – 8
Rules for Double Entry Accounting Normally TWO entries, one Dr and one Cr
Ledger recording is based on a widely accepted set of rules.
The ............... hand column of all ledger accounts is known as DEBIT or “DR”.
The ............... hand column of all ledger accounts is known as CREDIT or “CR”.
(Right / Left)
Example; my business has $10 in its bank (CA or Asset) and owes $3 (CL or Liability) to Mr
Sameen. So the capital (C) or value of the business is $7
A
=
L
=
C
=
=
=
C
+
A
=
L
+
-
L
A
-
C
-
(This is the basic accounting equation)
It is commonly accepted that Assets .......................on the debit side; that is, left hand side
and ....................... on the right hand side. Whereas changes in .................... must be
recorded on the opposite side to ................, in order to keep the accounting equation in
balance. ( liabilities, assets, increases, decreases)
Liabilities ..................... on the credit side and ..................... on the debit side.
(decrease/increase)
Changes in Equity are recorded on the same side as Liabilities, again so the basic accounting
equation remains in balance.
ASSETS
LIABILITIES + CAPITAL
INCREASE
DECREASE
This is essential for our “double entry” recording process to work properly and for the Balance Sheet
to remain “in balance”.