Debits and credits
Debits and credits are used in double entry-bookkeeping to know what money is going in or going out to your business.[1]
An account is debited when the money is going in to your business.[2] This means that increase in assets and expenses are recorded as debits.
Meanwhile, an account is credited when the money is going out from your business.[2] This means that increase in liabilities, capital, and revenues are recorded as credits.[3]
If assets and expense decreases, they are recorded as credits.[3]
If liabilities, capital, and revenues decreases they are recorded as debits.[3]
The chart also explains the following below:
| Kind of account | Debit | Credit |
|---|---|---|
| Asset | Increase | Decrease |
| Liability | Decrease | Increase |
| Income/Revenue | Decrease | Increase |
| Expense | Increase | Decrease |
| Capital | Decrease | Increase |
| Accounts that are normally recorded as debits are in bold | ||
References
- NetSuite.com. "Accounting 101: Debits and Credits". Oracle NetSuite. Retrieved 2023-01-14.
- "Debits VS Credits: A Simple, Visual Guide | Bench Accounting". Bench. Retrieved 2023-01-14.
- Ballada, Win Lu (1996). Accounting Made Easy. Manila Philippines: GIC Enterprises Co., Inc. p. 25.
This article is issued from Wikipedia. The text is licensed under Creative Commons - Attribution - Sharealike. Additional terms may apply for the media files.