Accounting Question?

Question

I always screw up when I think in terms of credit account and debit account. What is the best way of remembering how one is increasing??

Answer 1

Each account has a normal balance, be it debit or credit. Accounts with a normal debit balance will increase when a debit hits the account and decrease when a credit hits the account. The reverse is true as well. Accounts with a normal credit balance will increase when a credit hits the account and decrease when a debit hits the account.

My rule of thumb is as follows:

Debits -- Assets, Cost/Expenses
Credits -- Liabilities, Equity, Revenues

For example, cash is an asset. If you have $100 in cash, then your Cash account has a $100 debit balance. If you spend $20, then your cash should decrease. To decrease an account with a normal debit balance, you would need to credit cash for the $20. That way a debit of $100 less a credit of $20 would yield a new debit balance of $80.

Watch out for contra accounts !!!

For example, a contra-asset (e.g., accumulated depreciation) has a normal credit balance. It does not increase with a debit (as an asset would), but instead it increases with a credit -- which is the reverse of its counterpart, an asset. Likewise, a contra-revenue account(e.g., sales discounts) would increase with a debit because its normal balance is a debit. Again, this is the reverse of its counterpart, revenues.

Hope that helps!

Answer 2

If you look on your transaction register (that little book you keep for your accounts, where you write in deposits/withdrawls/purchases), on the top line where it shows which column to put in description/date/credit/debit/etc... there is a + sign next to Credit, and a - sign by Debit.

Know how when you are returning something at say Walmart, and you bought it on your credit/debit card? The clerk usually says "12.52 will be credited back onto your card." You returned it... you're getting credited... you get money back... you ADD (+) the amount to what you had before! :-) Hope this helped!

Answer 3

A credit account goes up with credits.
(just think credit adds to credit)

A debit account goes up with debits.
(just think debit adds to debit)

Answer 4

Make a T table and write dea-ler on the top

The left side is debits (Increase)
D- Dividends
E- Expense
A- Assets

The right side is credit (Increase)
L - Liabilities
E - Shareholder Equity
R - Revenues

Answer 5

Assets and expenses are Debits liabilities and income are credits.

Answer 6

uhm..

Debit is up.. credit is down for cash atleast

the way i remembered was just thinking about it over and over again until it stuck in my head..

Answer 7

http://www.quickmba.com/accounting/fin/debits-credits/

this website explains it quite well.