1. Bookkeeping is the art of recording the transactions of a business

in a manner that makes it possible to determine the accuracy of the records. The objects of bookkeeping are: (_a_) To exhibit a record of the separate transactions of a business. (_b_) To furnish statistical information in respect to any particular class of transactions. (_c_) To exhibit the financial standing or condition of a business. When properly assembled the bookkeeping records become _accounts_ (for definition, see Dictionary of Commercial Terms). If correct methods are used, the bookkeeping records will be assembled or grouped in a manner to show their exact nature and their bearing on the status of the business, or the standing of the account. =2. Debit.= The term _debit_ designates those items in an account representing values with which we have parted, or transferred to another person or account. Debits are always placed on the left side (or in the left-hand column) of an account. Debits to persons are of the following classes: (_a_) The transfer of merchandise. (_b_) The rendering of services. (_c_) The use of something of value. _Examples_-- (_a_) We sell to John Doe two tons of coal at $7.50 per ton. We _debit_ his account with the amount. (_b_) We render services to Thos. Ryan for which he is to pay us a stated fee. We _debit_ his account with the amount of the fee. (_c_) We are to pay rent for the use of our offices. Our landlord _debits_ us with the amount. =3. Credit.= The term _credit_ designates those items in an account representing value which we have received or which has been transferred to us. Credits are always placed on the right side (or in the right-hand column) of an account. Credits to persons are of the following classes: (_a_) The receipt of merchandise or money. (_b_) The rendering of services. (_c_) The use of something of value. _Examples_-- (_a_) John Doe pays us $10.00 on account. We _credit_ his account with the amount. (_b_) Our attorney makes a charge for legal services. We _credit_ his account with the amount. (_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