Debits versus Credits

By Michael Reimer
Left Side is Right side
the debit is the credit
side side
This is where all the daily
transactions of a business are
recorded.
The general journal entries are
posted here.

The account balances are updated

each day.
Assets = Liabilities + Owner’s Equity
Left side of the balance sheet
equation

Normal asset balance is a debit

Assets go up                
with a debit     Assets 
Debit    Credit    
Assets go down    
with a credit
Properties or economic resources

Provision of future company

benefits
Cash
Receivables
Supplies
Machinery
Land
Inventory held for sale
Right side of the balance sheet
equation

Normal liability balance is a credit

Liabilities go
up with a credit Liabilities
Debit Credit
Liabilities go
down with a
debit
Debts or payables owed by the
business

A reduction of future assets of the

business
Accounts Payable
Notes Payable
Bank Loan Payable
Mortgage Payable
Two Accounts:

Capital: records the owner’s investment

in the business

Withdrawals: records the owner’s

personal drawings from the business
Capital goes up M. Reimer, Capital
with a credit Debit Credit
Capital goes
down with a
debit
Withdrawals goes
M. Reimer,
Withdrawals
up with a debit
Debit Credit
Withdrawals goes
down with a credit
Is linked with another account

Has an opposite balance to its

counterpart

Reduces the value of its counterpart

 Revenues – Expenses = Profit or Loss
Revenues go Revenue
up with a credit Debit Credit

Revenues go
down with a
debit
Two different types:
Service based:
Work provided to customers (Chapters 3 to 5)

Retail based:
Sales of inventory to customers (Chapter 6)
Sales
Commissions Earned
Professional Fees Earned
Rent Revenue
Interest Earned
Expenses go up
with a debit Expenses
Debits Credits
Expenses go
down with a
credit
Incur costs while doing daily
business

Show a consumption of assets to

generate revenues
Advertising Expense
Supplies Expense
Telephone Expense
Utilities Expense
Wages Expense
Rent Expense
Insurance Expense
Left side is Right side
the debit is the credit
side side
Assets

Withdrawals

Expenses
Liabilities

Capital

Revenues