Accounting Cheat Sheet For Transactions (Page 4 of 6) in pdf

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Definitions of Debits and Credits

Debit

An entry in the financial books of a firm that increases an asset or an expense or an entry that decreases a

liability, owner's equity (capital) or income.

Also, an entry entered on the left side (column) of a journal or general ledger account.

Let's combine the two above definitions into one complete definition.

An entry (amount) entered on the left side (column) of a journal or general ledger account that increases an

asset, draw or an expense or an entry that decreases a liability, owner's equity (capital) or revenue.

Credit

An entry in the financial books of a firm that increases a liability, owner's equity (capital) or revenue, or an

entry that decreases an asset or an expense.

Also, an entry entered on the right side (column) of a journal or general ledger account.

Let's combine the two above definitions into one complete definition.

An entry (amount) entered on the right side (column) of a journal or general ledger account that increases a

liability, owner's equity (capital) or revenue, or an entry that decreases an asset, draw, or an expense.

The term debit refers to the left side of an account and credit refers to the right side of an account. A debit is

always entered in the left hand column of a Journal or Ledger Account and a credit is always entered in the

right hand column. Debit is abbreviated Dr. and Credit is abbreviated Cr.

When you post (record) an entry in the left hand column of an account you are debiting that account.

Whether the debit is an increase or decrease depends on the type of account. Likewise, when you post

(record) an entry in the right hand column of an account you are crediting that account. Whether the credit is

an increase or decrease depends on the type of account.

How To Use and Apply The Debit and Credit Rules:

(1) Determine the types of accounts the transactions affect-asset, liability, revenue, expense or draw account.

(2) Determine if the transaction increases or decreases the account's balance.

(3) Apply the debit and credit rules based on the type of account and whether the balance of the account will

increase or decrease.

Our Simple Debit / Credit Rule

All Accounts that Normally Have a Debit Balance are Increased with a Debit by placing the

amount in the Left Column of the account and Decreased with a Credit by placing the amount in the

Right Column of the account.

Assets

Draws

Expenses

All Accounts that Normally have a Credit Balance are Increased with a Credit by placing the

amount in the Right Column of the account and Decreased with a Debit by placing the amount in

the Left Column of the account.

Liabilities

Owner's Equity ( Capital )

Revenue

All You Need To Know About Debits and Credits

Summarized In One Sentence

Enter an amount in the Normal Balance Side of an Account to Increase the Balance of

an Account and in the Opposite Side of an Account to Decrease the Balance of an

Account.

Additional Clarification:

Since Assets, Draw, and Expense Accounts normally have a Debit Balance, in order to Increase the

Balance of an Asset, Draw, or Expense Account enter the amount in the Debit or Left Side Column and in

order to Decrease the Balance enter the amount in the Credit or Right Side Column.

Accounting Cheat Sheet For Transactions Page 4

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