Chapter 8: Debits and Credits

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For a bank account a debit means decrease and credit means increase -- this is not always true in accounting. A debit or credit to an account can increase or decrease it depending on the type of account

Debit increases accounts in Credit increases accounts in Debit increases accounts in
A LE - R E

Since a checking account is a Liability account (for the bank) a credit increases the balance and a debit decreases the balance.

  • In a journal entry debit is listed first and corresponding credit second with an indentation to the right
  • debit is abbreviated DR and credit is abbreviated CR
  • often these abbreviations are omitted and only indentations are used

For example if your company takes a loan of $50k

Journal Entry
DR Cash $50,000
CR Notes Payable $50,000

Example, you pay $500 for office supplies -- you decrease cash (Asset) and increase your expense

Journal Entry
DR Expense Office Supplies $500
CR Cash $500

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  • 10 months ago by vince