When we record the transactions of assets buying or increment or spending expenses, we always debit specific asset or expense. But do you know, why does any single increase of asset or expense debit? No, Ok, Today, I am explaining its simple logic.
1st Logic : On the Basis of Accounting Equation
Double entry system works on the basis of accounting equation
This shows assets always equal to the liabilities.
or simple
Assets = Liabilities
Now If all time this equation will show A= L, then here asset is coming of asset in business. We must debit because there is something credit for equate the equation.
For example, I say, give me your furniture of Rs. 1,00,000. I need for business. Will you give no. I have to give my own asset Means one form of asset, I have to decrease or I have to take loan. Both loan and decrease in asset will go liability side. I have bought same furniture of Rs. 1 ,00,000 by paying cash. So, cash asset has decreased it will debit. And furniture asset will increase, it will debit
Which will fulfil our accounting equation
Asset = Liability
+ Furniture Rs. 1,00,000 =
- Cash Rs. 1,00,000
or we can send cash in liability side and both equation will equal
+ Furniture Rs. 1,00,000 = + Cash Rs. 1,00,000
We can say also increase in asset will debit because it is the part of on side of accounting equation and decrease in asset or increase in the liability in same transaction will automatically happen which will credit
Like this, increase in our expenses will debit because actually, it is decrease capital. Capital when we bring in the business, it will increase our business liability. So, capital must credit and decrease in capital will automatically go to asset side of accounting equation. So, expenses increase will debit.
For example, I paid internet bill of my business Rs. 1300. I paid it through cash. For example, I have taken capital of Rs. 1,00,000 in my business. So, with Rs. 1300 will decrease same capital
Asset = + Capital Rs. 1,00,000
= - Rs. 1300 internet expenses
It is service which I have consumed and and same benefit will promote my business. So, in accounting equation, we can show as
+ internet bill exp. Rs. 1300 = + 1300 cash paid for internet bill
cash will credit because it is decrease of asset due to payment of internet bill
2nd Logic : On the Basis Future and Current Benefits
Every thing what comes in your business for future benefits will be debited in journal entry and Everything whose current benefit you have received will also debit in the form of expense. Assets gives future benefits and expenses has given current time benefit. That is reason both assets and expenses will debit in journal entry.
