debits versus credits by michael reimer. left side is the debit side right side is the credit side
TRANSCRIPT
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Debits versus CreditsDebits versus CreditsBy Michael ReimerBy Michael Reimer
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Left Side is the debit
side
Right side is the creditside
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This is where all the daily transactions of a business are recorded.
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The general journal entries are posted here.
The account balances are updated each day.
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Assets = Liabilities + Owner’s Equity
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Left side of the balance sheet equation
Normal asset balance is a debit
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Assets go up with a debit
Assets go down with a credit
Assets
Debit Credit
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Properties or economic resources
Provision of future company benefits
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CashReceivablesSuppliesMachineryLandInventory held for sale
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Right side of the balance sheet equation
Normal liability balance is a credit
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Liabilities go up with a credit
Liabilities go down with a debit
Liabilities
Debit Credit
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Debts or payables owed by the business
A reduction of future assets of the business
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Accounts PayableNotes PayableBank Loan PayableMortgage Payable
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Two Accounts:
Capital: records the owner’s investment in the business
Withdrawals: records the owner’s personal drawings from the business
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Capital goes up with a credit
Capital goes down with a debit
M. Reimer, Capital
Debit Credit
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Withdrawals goes up with a debit
Withdrawals goes down with a credit
M. Reimer, Withdrawals
Debit Credit
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Is linked with another account
Has an opposite balance to its counterpart
Reduces the value of its counterpart
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Revenues – Expenses = Profit or Loss
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Revenues go up with a credit
Revenues go down with a debit
RevenueDebit Credit
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Two different types:Service based:
Work provided to customers (Chapters 3 to 5)
Retail based:Sales of inventory to customers
(Chapter 6)
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SalesCommissions EarnedProfessional Fees EarnedRent RevenueInterest Earned
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Expenses go up with a debit
Expenses go down with a credit
Expenses Debits Credits
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Incur costs while doing daily business
Show a consumption of assets to generate revenues
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Advertising ExpenseSupplies ExpenseTelephone ExpenseUtilities ExpenseWages ExpenseRent ExpenseInsurance Expense
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Left side is the debit side
Right side is the creditside
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Assets
Withdrawals
Expenses
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Liabilities
Capital
Revenues