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Rules of Debit and Credit

The document discusses accounting concepts including the accounting equation, t-accounts, debits and credits, normal balances, and how transactions affect different types of accounts. It explains that assets increase with debits while liabilities and equity increase with credits, and that whether a debit or credit increases or decreases an account depends on the specific type of account. The accounting equation forms the basis for understanding how debits and credits impact asset, liability, and equity accounts.

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ASHANTI JANE EREDIANO
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPTX, PDF, TXT or read online on Scribd
75 views

Rules of Debit and Credit

The document discusses accounting concepts including the accounting equation, t-accounts, debits and credits, normal balances, and how transactions affect different types of accounts. It explains that assets increase with debits while liabilities and equity increase with credits, and that whether a debit or credit increases or decreases an account depends on the specific type of account. The accounting equation forms the basis for understanding how debits and credits impact asset, liability, and equity accounts.

Uploaded by

ASHANTI JANE EREDIANO
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
You are on page 1/ 13

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The Account

A detailed record
of increases and
decreases in
specific assets,
liabilities, equities,
revenues, or
expenses.
Separate accounts
are maintained for
each item of
importance.
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T-Account

A helpful tool used to show the effects of


transactions and events on individual
accounts.

Account Title

(Left Side) (Right Side)


Debit Credit
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Debits and Credits

The starting point:


Asset accounts are increased with debits
or by putting numbers in the
left-hand (or debit) column.

When recording transactions:

Debits must = Credits


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Double-Entry Accounting

Assets = Liabilities + Equity


ASSETS LIABILITIES EQUITY

Debit Credit Debit Credit Debit Credit


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Double-Entry Accounting

Equity
Owner’s _ Owner’s _
Capital Withdrawals + Revenues Expenses

Capital Withdrawals Revenues Expenses

Debit Credit Debit Credit Debit Credit Debit Credit


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Accounting Equation

Asset Liability Equity


Accounts = Accounts + Accounts

Let’s reconstruct the debit/credit rules


by looking at the
expanded accounting equation.
Next

Expanding the
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Accounting Equation

Asset Liability Equity


Accounts = Accounts + Accounts

Owner’s
Capital
– Owner’s
Withdrawals
+ Revenues – Expenses
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Page

Adding Debits & Credits Click


Here

to the Expanded Accounting Equation

The Expanded Accounting Equation:


Assets = Liabilities + Capital – Withdrawals + Revenues – Expenses

Rearranged:
Assets + Withdrawals + Expenses = Liabilities + Capital + Revenues

The accounts on the left: The accounts on the right:


• Increase with Debits • Increase with Credits
• Decrease with Credits • Decrease with Debits
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Balance of an Account

An account balance is the difference between


the increases and decreases in an account.
Cash T-Account for FastForward

Cash
Investment by owner 30,000 Purchase of supplies 2,500
Consulting services revenues earned 2,200 Purchase of equipment 20,000
Collection of accounts receivable 1,900 Payment of rent 1,000
Payment of salary 700
Payment of note payable 900
Withdrawal by owner 600
Total increases 34,100 Total decreases 25,700
Less decreases (25,700)
Balance 8,400
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Normal Balances
The balance column ledger does not indicate whether
the balance in an account is a debit or credit. This is
because each account is assumed to have a normal
balance unless indicated otherwise.

Assets = Liabilities + Equity


Assets Liabilities
Debit for Credit for Debit for Credit for
+ - - +
Normal Normal
Continue
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Normal Balances

Assets = Liabilities + Equity

Owner’s _ Owner’s _
Capital Withdrawals + Revenues Expenses

Owner's Capital Revenues


Debit for Credit for Debit for Credit for
- + - +
Normal Normal

Continue
Next
Page
Click
Here

Normal Balances

Assets = Liabilities + Equity

Owner’s _ Owner’s _
Capital Withdrawals + Revenues Expenses

Owner's Withdrawals Expenses


Debit for Credit for Debit for Credit for
+ - + -
Normal Normal
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Page
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Here

Debits and Credits


Whether a debit is an
increase or a decrease
depends on the
account.

Whether a credit is an
increase or a decrease
depends on the
account.

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