Accounting and finance

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The rule of accounting on classification of accounts and a law to either Debit or Credit dwells on the type of accounts, affecting a given transaction. For instance, where we record a provision for doubtful debts; we Dr doubtful debt expense
and Cr provision for doubtful debt with the same amount.

In the case where a record of discount is present on loanable funds, we Dr Discount received account arriving from loanable funds; as a record of account for other incomes. Contra entry accounting is crucial in recording transactions that duly affect each other. Note: when assets increase we Dr and Cr when the same assets reduce. When liabilities increases we Cr and a decrease credited.

In the case of an expense or a liability arriving from doubtful debt, an increase will mean Dr doubtful debt account and Cr of provision for doubtful debt account.
NB: Dr of doubtful expense accounts is applied in adjustments of the income statement, whereof: Cr of provision for doubtful debt is applied in the balance sheet.

Journals will help avail information on transactions that took place in an entity. The law of bookkeeping; assets equals shareholders equity plus liabilities will hold. We Dr for every asset received and credit for every asset disowned. Whatsoever, We Dr liabilities when they reduce and Cr when they increase. The accounting principles; materiality, full disclosure, prudence, cash and accrual basis and historical are taken into account when journalising.

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A journal will help arrive at the correct ledgers entries. Closing entries of journals are posted to the trial balance to ascertain the accuracy of books of accounts; ledgers.

When running a business entity, we expect profits in order to grow financial-wise. Income is the main target by the business management and administration. Wherein, economic inflow of finances is termed as the revenues or income.