* Note: Debit can be abbreviated as “Dr” and Credit can be abbreviated as “Cr”
RULES FOR DEBIT AND CREDIT BALANCE ACCOUNTS
* DEBIT (Dr) means LEFT side * CREDIT (Cr) means RIGHT side * Debit Balance Accounts: INCREASE when you DEBIT them and DECREASE when you CREDIT them * Credit Balance Accounts: INCREASE when you CREDIT them and DECREASE when you DEBIT them -‐ These rules are based on T-‐accounts: These accounts look like the letter “ T ” § The left side is known as the Debit side and the right side is known as the Credit side * Note: CASH is an Asset Based Debit Balance Account, which INCREASES (on the LEFT) when you DEBIT it Sample T-‐account: and DECREASES (on the RIGHT) when you CREDIT it. CASH (account)
3,000 300 500 200 250
Balance 3,250 A General Rule for Debit and Credit Balance Accounts can be found within the expanded Dual-‐Aspect Accounting Formula Assets + Expenses = Liabilities + Equity + Revenue
Debit Balance Accounts
Credit Balance Accounts
INCREASE is on the DEBIT (LEFT) Side
INCREASE is on the CREDIT (RIGHT) Side
BALANCE SHEET Debit Balance Accounts INCREASE is on the DEBIT (LEFT) Side
ASSETS Accounts Receivable Cash Equipment, Supplies, Merchandise, Inventory, Furniture Prepaid Insurance Prepaid Rent
• • •
• •
• • • • •
LIABILITIES Accounts Payable Interest Payable Notes Payable Salary Payable Sales Tax Payable
• •
Accumulated Depreciation Unearned Revenue
• •
OWNER’S EQUITY Capital, Stocks, Dividends Retained Earnings
* Anything with the word “Payable” is a Credit Balance Account
Credit Balance Accounts
INCREASE is on the CREDIT (RIGHT) Side
INCOME STATEMENT Debit Balance Accounts INCREASE i s on the Side DEBIT (LEFT)
EXPENSES
* Anything with the word “Expense” is a Debit Balance Account
• • • • • • • • •
Advertising Expense Repair Expense Credit Card Expense Delivery Expense Insurance Expense Interest Expense Supplies Expense Rent Expense Salary Expense
•
Cost of Merchandise Sold
•
REVENUE Sales, Sales Discount, Sales Returns & Allowances
•
Service Revenue
* Anything with the word “Revenue” is a Credit Balance Account
Credit Balance Accounts
INCREASE is on the CREDIT (RIGHT) Side