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Saturday, 26 January 2019

What are the heads of accounting?


Similar to every other subject accounting is also divided into different heads or classes these Heads help Accountants in identifying the kinds of business transactions and their treatment in accounting records or financial statements.

There are five major accounting heads with their corresponding  treatment in the debit/ credit side of the accounting records.


Assets: 

When assets are increased it is recorded in the Debit balance of accounting records.  Moreover, when an asset decreases it is recorded in the credit balance of accounting records.

Expenses:


Increased expenses are recorded in the Debit balance of accounting records and vice versa.

Revenue/ Income:


When a business earns some revenue. This revenue is recorded in the credit balance of accounting records and when a business bears some losses, then these losses are recorded in the Debit balance of accounting records.

Liabilities: 


When a business raises finances through loans or any other credit facility. These loans are recorded in the credit balance of accounting records. However, when these lones are repayed then they are recorded in the Debit balance of accounting records.

Owner's/ Partner's/ Shareholder's Equity:


When equity/ capital is increased through business activities or by investments. This increase is recorded in the credit balance of accounting records. However, when capital decreases, then this is recorded in the debit balance of accounting records.

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