Editing Double-entry bookkeeping (section)

==Approaches==
There are two different ways to record the effects of debits and credits on accounts in the double-entry system of bookkeeping. They are the Traditional Approach and the Accounting Equation Approach. Irrespective of the approach used, the effect on the books of accounts remains the same, with two aspects (debit and credit) in each of the transactions.

===Traditional approach===
Following the Traditional Approach (also called the British Approach) accounts are classified as real, personal, and nominal accounts.<ref name="V.2011">{{cite book|author=Rajasekaran V.|title=Financial Accounting|url=https://books.google.com/books?id=qP3XNPoLO7wC&pg=PA54|date=1 September 2011|publisher=Pearson Education India|isbn=978-81-317-3180-2|page=54}}</ref> Real accounts are accounts relating to assets both tangible and intangible in nature. Personal accounts are accounts relating to persons or organisations with whom the business has transactions and will mainly consist of accounts of debtors and creditors. Nominal accounts are accounts relating to revenue, expenses, gains, and losses. Transactions are entered in the books of accounts by applying the following golden rules of accounting:
# Real account: Debit what comes in and credit what goes out.
# Personal account: Debit the receiver and credit the giver.
# Nominal account: Debit all expenses & losses and credit all incomes & gains<ref name="nadu">{{cite book|title=Accountancy: Higher Secondary First Year|year=2004|publisher=Tamil Nadu Textbooks Corporation|pages=28–34|url=http://www.textbooksonline.tn.nic.in/Books/11/Std11-Acct-EM.pdf|edition=First|access-date=12 July 2011|archive-url=https://web.archive.org/web/20110904222614/http://www.textbooksonline.tn.nic.in/Books/11/Std11-Acct-EM.pdf|archive-date=4 September 2011|url-status=dead}}</ref><ref name="Hyans1916">{{cite book|author=Edward M. Hyans|title=Theory of accounts for accountant students|url=https://books.google.com/books?id=Wkk-AAAAYAAJ&pg=PA17|year=1916|publisher=Universal Business Institute, Inc.|page=17}}</ref>

===Accounting equation approach===
This approach is also called the American approach. Under this approach transactions are recorded based on the accounting equation, i.e., Assets = Liabilities + Capital.<ref name="V.2011"/> The accounting equation is a statement of equality between the debits and the credits. The rules of debit and credit depend on the nature of an account. For the purpose of the accounting equation approach, all the accounts are classified into the following five types: assets, capital, liabilities, revenues/incomes, or expenses/losses.

If there is an increase or decrease in a set of accounts, there will be equal decrease or increase in another set of accounts. Accordingly, the following rules of debit and credit hold for the various categories of accounts:
# Assets Accounts: debit entry represents an increase in assets and a credit entry represents a decrease in assets.
# Capital Account: credit entry represents an increase in capital and a debit entry represents a decrease in capital.
# Liabilities Accounts: credit entry represents an increase in liabilities and a debit entry represents a decrease in liabilities.
# Revenues or Incomes Accounts: credit entry represents an increase in incomes and gains, and debit entry represents a decrease in incomes and gains.
# Expenses or Losses Accounts: debit entry represents an increase in expenses and losses, and credit entry represents a decrease in expenses and losses.
These five rules help learning about accounting entries and also are comparable with traditional (British) accounting rules.