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Mostly followed the British Rule A. American approach: In order to understand the rules of debit and credit cccording to this appro transactions are divided into the following five cctegones: Transactions relating to owner, e... Capital These are personel accounts {Transactions relating to other liabilities. e... suppliers of goods These are mostly perso accounts {i} Transactions relating to assets, e.g. lond, building, cash. bank. steck-in-lcde, bills receive These are basically all real accounts (iv) Transactions relating to expenses, e.g. rent, sclory ccmrr'ission. wages, cartege - These nominal accounts (v) Transactions reluing to revenues. e... interest recoved dividend received, soke of goo These are nominal accounts To Sum Up For Assets DI Cr. For Llabilitles Or Cr For Capital Dr. Cr. fricrease in Assets Decrease in Assets Decrecse in liabilities Increase in Liabilities Decrecse in Capital Increcse in Capital Decrecse in Income Increase in Income Increcse in Expense Decrecse in Expense Increcse in Stock Decrecse in Stock For Incomes Dr. Cr. For Expense Dr. Cr. For Stock Dr. Cr B. British Approach or Double Entry System : When one identifies the account that is getting cffected by c transaction cnd type of thci occo the next step is to apply the rules to decide whether the cccounting treatment is to debit or credit account. The Golden Rules will guide us whether the account is to be debited or credited. FUNDAMENTALS OF ACCOUNTINGTI 2 Accounting Process These rules are shown below: Personal Account Deoit the receiver or who owes to business Credit the giver or to whom business owes Real Account Debit what comes into business Credit what goes cut of business Nominal Account Depit all expenses or losses Credit cll income or cains illustration 3 Ascertain the debit and credit from the fo lowing particulars under Mcdern Approach. (a) Started business with capital. (b) Bought goods for cash. (c) Sold goods for cash. id Paid salary (e) Received Interest on Investment. (f) Bought goods on credit from Mr. Y (9) Paid Rent out of Personal cash