Debit Credit Rules

In financial accounting debit and credit are simply the left and right side of a T-Account respectively. They are used to indicate the increase or decrease in certain accounts. When there is a change in an account, that change is indicated by either debiting or crediting that account according to following rules:

• Assets and Expenses 
  An increase is recorded as debit (left side) 
  A decrease is recorded as credit (right side) 
• Liabilities, Equities and Revenues 
  A decrease is recorded as debit (left side) 
  An increase is recorded as credit (right side) 
• Contra-accounts 
  Contra-accounts behave exactly in opposite way to the respective normal accounts.

Examples

1. The owner brings cash from his personal account into the business 
   Analysis: 
   Cash (an asset) is increased thus debit Cash 
   Owner capital (an equity) is increased thus credit Owners' Capital
2. Office supplies are purchased on account 
   Analysis: 
   Office Supplies (an asset) is increased thus debit Office Supplies 
   Accounts Payable (a liability) is increased thus credit Accounts Payable
3. Wages payable are paid 
   Analysis: 
   Wages Payable (a liability) is decreased thus debit Wages Payable 
   Cash (an asset) is decreased thus credit Cash
4. Revenue is earned but not yet received 
   Analysis: 
   Accounts Receivable (an asset) is increased thus debit Accounts Receivable 
   Revenue (a revenue) is increased thus credit Revenue