(c) We rent or lease property to another; and when payment is made, we credit his account.
4. Rules for Debit and Credit. Debit and credit are the fundamental principles of bookkeeping. The general rules to be followed in debits and credits are:
Debit cash when you receive it.
Debit a person when you trust him.
Debit a person when you pay him.
Credit cash when you pay it out.
Credit a person when he trusts you.
Credit a person when he pays you.
5. Balance. When the two sides of an account differ in amount, it is said to show a balance. If the debit side of the account is the larger, the difference is a debit balance. If the credit side of the account is the larger, the difference is a credit balance.
Example—If we debit John Doe's account for two tons of coal at $7.50 a ton, or $15.00 (see Example (a), Article 2), and credit his account with $10.00 paid (see Example (a), Article 3), the debit side of the account is $5.00 greater than the credit side. Therefore it shows a debit balance.
METHODS OF BOOKKEEPING
6. There are but two methods or systems of bookkeeping, and they are known as single entry and double entry. No matter in what form bookkeeping records are kept, the method must be either single or double entry.
Single entry is used only in very small businesses or by those who do not understand the advantages of double entry.
SINGLE ENTRY