Definition:
- Debit (dr) on left side and credit (cr) on right side
- think of debiting as more money/value coming into that account
- if value increase, debit balance
- Crediting as money/equivalent value flows out of that account
- if value increase, credit balance
- So for asset:
- debit: add money to it, balance increases
- credit: take money out, balance decreases
- for liability:
- debit: add money to it, balance (debt) decreases
- credit: money flows out (loan), balance increase
- Stockholder equity:
- debit: return money to invest/buy stock back, balance decrease
- credit: take money from investors/sell stocks, balance increase
- revenue: credit balance
- credit: out of revenue to cash, balance increases
- expense: debit balance
- debit: money flows into it, balance increases
- unearned revenue:
- credit: receives money from it, balance increases
- debit: perform services for it, balance decreases
- At the end, If Debits are greater than Credits, the account will have a debit normal balance
- For asset, debit should exceed credits normal balance on left side
- For liabilties and stockholder equity, credit should exceed debit, normal balance on right side