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.

An account is debited when the money is going in to your business. 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. This means that increase in liabilities, capital, and revenues are recorded as credits.

If assets and expense decreases, they are recorded as credits.

If liabilities, capital, and revenues decreases they are recorded as debits.

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  IncreaseAccounts that are normally recorded as debits are in bold

References

Category:Accounting