Every time the company records an expense, it is recorded as a debit even though expense accounts appear on the right side of the equation, and revenues are recorded as credits because they increase equity. Introduction to Debits and Credits, What Is an Account, Double-Entry Accounting, Debits & Credits. Cash in the bank, as well as petty cash on hand, is an asset.

Simply stated, assets are those things of value that your department/project owns. Increase liabilities with a credit and decrease them with a debit. Cash is credited because the cash is an asset. These withdrawals are recorded as debits, because they decrease equity. A quick reminder: Increase assets with a debit and decrease them with a credit. When you pay the bill, you would debit accounts payable because you made the payment. For instance, the account “owner withdrawals” shows up on the right side of the equation because it is an equity account, but it represents reductions in equity as the owner takes money out of the company. There are no exceptions to this rule, even though some accounts may seem to have strange rules at first. Equity is increased by a credit, decreased by a debit.Liabilities are increased by a credit, decreased by a debit.On the right side of the accounting equation:.Assets are increased by a debit, decreased by a credit.On the left side of the accounting equation:.Here are the rules: Increases in asset and expense accounts are recorded on the left side of the T, while decreases in assets are recorded on the right side. Here is a summary of the accounts in general: Whether a posting on the left constitutes an increase or decrease depends upon the nature of the account. Notice that each account has two sides-left and right. If the account is a liability or equity, it’s on the right side of the equation thus it would be increased by a credit. That is, if the account is an asset, it’s on the left side of the equation thus it would be increased by a debit. Therefore, those accounts are decreased by a debit.Īfter a while, you will have the rules for debits and credits for each type of account committed to memory, but for now, you can always determine which accounts are increased by a debit (and therefore decreased by a credit) and which accounts are increased by a credit (and therefore decreased by a debit) by using this bit of logic: ext An increase to an account on the right side of the equation (liabilities and equity) is shown by an entry on the right side of the account (credit). Therefore, those accounts are decreased by a credit. Some accounts are increased by a debit and some are increased by a credit. An increase to an account on the left side of the equation (assets) is shown by an entry on the left side of the account (debit).

Debit credit increase decrease