Every business transaction has two fold effect and recording of both pieces of a transaction is called double entry system of book keeping. There are two main approaches to examine the duality of the transaction and to find out whether the accounts to be debited or credited.

They are as under:

1. Accounting equation approach:

Assets = Liabilities + Capital

For Assets = Add debit and subtract the credit
For Liabilities & Capital = Subtract debit and Add credit

2. Traditional approach :
a. Personal account,
b. Real account, and
c. Nominal Account.


Post a Comment