DEBITS AND CREDITS – THE DOUBLE ENTRY SYSTEM

 Accounting is based on double-entry system which means the dual effect of a business
transaction is recorded. EACH TRANSACTION AFFECTS AT LEAST TWO ACCOUNTS. The
total debits for a transaction must be always equal the total credits.
 ACCOUNT may be defined as a detailed record of the increases, decreases and the balance
of each element that appears in an entity’s financial statements.
 An account is DEBITED when an amount is entered on the LEFT side of the account and
CREDITED on the RIGHT side.

ACCOUNT TITLE

Left side or DEBIT side Right side or CREDIT side

Owner’s Investment Pxx
Revenue xx
Expense (xx)
Withdrawals (xx)
Owner’s Equity, end Pxx

ASSETS = LIABILITIES + OWNER’S EQUITY

Debit = Credit Credit

Assets = Liabilities + OE + Revenue – Expense – Withdrawals

Withdrawals + Expense + Assets = Liabilities + OE + Revenue

DRAWINGS / WITHDRAWALS, EXPENSES AND ASSETS [DEA]

 Increases in Drawings/Withdrawals, Expenses and Assets [DEA] are recorded as debits.

[Debit +]
 Decreases in Drawings/Withdrawals, Expenses and Assets [DEA] are recorded as credits.
[Credit -)
 Normal Balance = “Debit”.

LIABILITIES, EQUITY / OWNER’S EQUITY, AND REVENUE [LER]

 Increases in [LER] are recorded as credits. [Credit +]

 Decreases in [LER] are recorded as debits. [Debit -)
 Normal Balance = “Credit”.