Page 176 - Office Practice and Accounting 10

Rule for debit and credit

On the basis of account classification
It is also known as traditional rule. Under this method, accounts are classified as
personal, real and nominal account and rule of debit and credit is applied as follows:
Personal account: all the natural and artificial persons come under personal account .
For example, Ram's A/c, Sita's A/c, Hari A/c ,XYZ Co A/c, Pashupati Trader’s A/c, etc.

The rule is:
Debit the receiver

Credit the giver
Real account: All property or assets having monetary value of the business come
under real account. For example, Cash A/c, Machinery A/c, Land and Building A/c,
Goodwill A/c, etc.

The rule is:
What comes in-Debit
What goes out-Credit

Nominal account: Accounts relating to expenses, losses, incomes, and gains come
under nominal accounts. For example, rent A/c, salaries A/c, wages A/c, interest A/c,
discount A/c, etc.
The rule is:

All expenses and losses are-Debit
All income and gains are-Credit

On the basis of nature of transactions:

This method is known as modern rule. Increase or decrease in the value of transactions,
record is maintained under this method.
Increase in Assets, Loses and Expenses – Debit
Decrease in Assets, Loses and Expenses – Credit

Increase in Capital, Income and Liabilities – Credit
Decrease in Capital, Income and Liabilities – Debit

Types of Journal Voucher
On the basis of nature of transactions, journal vouchers are classified into the following
three types:
1. Journal voucher for budget expenditures.

170 Office Practice and Accounting 10