Double Entries

In accounting, Debit and Credit do not mean increase or decrease. It only means "Left" and "Right" hand side of the account.

Remember:
B/S - For assets, the account balance should be in "Debit" side.
B/S - For liabilities, the account balance should be in "Credit" side.
P/L - For income, the account balance should be in "Credit" side.
P/L - For expenditures, the account balance should be in "Debit" side.

You need to see the nature of the account before you decide the balance of the account is "DR" or "CR".

For example:
Balance Sheet item:
Bank, Cash, Debtors, Fixed Assets, Prepayment, etc - are "Assets" in nature. So increase is in "DR" and decrease is in "CR".

Creditors, Provision for depreciations, Provision for Bad Debts, Loans, Director's drawings etc. - are "liabilities" in nature. So increase in "CR" and decrease in "DR"

P&L item:
Sales, Other income, Interest, Rental Income, etc - are "income" in nature. Increase should be "CR" and decrease should be "DR"

Depreciations, Transportations Cost, Electricity & Water, Registration Fee, etc. - are "expenditure" in nature. Increase in "DR" and decrease in "CR"

Based on the method above, you can easily remember the double entry of the account.


As I said, Provision for depreciation is "Liabilities" in nature under the balance sheet. So increase is "CR" and decrease is in "DR"

The double entry would be:
Dr Depreciation - P/L
Cr. Provision for Depreciation - B/S

Finally, the Provision for Depreciation would be off-set to the cost of fixed assets to get the remaining value of the Fixed Assets.

When you familiar with the above method, you can easily handle the questions on "Correction of Error" since most of them are the problem on double entry (e.g. single entry).

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