Dr-Cr Transcript
Basic Bookkeeping Concepts > Debits-Credits
Very few areas of an introductory accounting class give students trouble like the rules of debits and credits.
Much of life is about following rules.
Don't go on red. Don't steal. Do pay taxes. Always flush and wash your hands. Well, from my experience on college campuses that last one might be a suggestion.
Anyway, accounting is no different we have rules that tell us how to account for transactions and those rules are known as the rules of debits and credits.
The debit rules are as follows:
Assets, withdrawals, and expenses all increase by debits. I remember this with the acronym, "AWE." Debits increase AWE.
The normal balance of an account is what we would expect to see in a particular account. The normal balance is always what increases the account.
So, the normal balance for assets, withdrawals and expenses are debit balances.
The credit rules are as follows:
Capital, liabilities, and revenues are all increased by credits. I remember this with the acronym "CLR." Credits increase CLR.
The normal balance of capital, liabilities, and revenues are credit balances.
When we follow the rules of debits and credits the accounting equation always remains in balance.
Let's conclude with a recap of the rules of debits and credits.
Assets increase with debits and have normal debit balances.
Withdrawals increase with debits and have normal debit balances.
Expenses increase with debits and have normal debit balances.
Capital (Owner's Equity) increases with credits and have normal credit balances.
Liabilities increase with credits and have normal credit balances.
Revenues increase with credits and have normal credit balances.