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