BACHELOR OF BUSINESS ADMINISTRATION

Detailed explanation-1: -The golden rule for personal accounts is: debit the receiver and credit the giver. In this example, the receiver is an employee and the giver will be the business. Hence, in the journal entry, the Employee’s Salary account will be debited and the Cash / Bank account will be credited.

Detailed explanation-2: -The rule of debiting the receiver and crediting the giver comes into play with personal accounts. A personal account is a general ledger account pertaining to individuals or organizations. If you receive something, debit the account. If you give something, credit the account.

Detailed explanation-3: -Ledger accounts that contain transactions related to individuals or other organizations with whom your business has direct transactions are known as personal accounts. Some examples of personal accounts are customers, vendors, salary accounts of employees, drawings and capital accounts of owners, etc.

Detailed explanation-4: -A personal account credit balance in non-business terms, is money owed to you by the bank, i.e. the bank is your creditor which means you have money in the bank. When credit side is greater that the debit side the difference is called “credit balance". So, if credit side > debit side, it is a credit balance.

Detailed explanation-5: -The left-hand side of an account is called a Debit side whereas right-hand side is called as Credit side. The debit is denoted as ‘Dr’ and credit is denoted as ‘Cr’.