PART 1 – Debit and Credit Terms in General

• Debit means left and Credit means right
• To decrease an account you do the opposite of what was done to increase the account. For example, an asset account is increased with a debit. Therefore it is decreased with a credit.
• The abbreviation for debit is dr. and the abbreviation for credit is cr.

• Generally, these types of accounts are increased with a debit: 
  • Dividends (Draws) 
  • Expenses 
  • Assets 
  • Losses 

• Generally, the following types of accounts are increased with a credit: 
  • Gains 
  • Income
  • Revenues 
  • Liabilities 
  • Stockholders’ (Owner’s) Equity 

• When looking at an account in the general ledger, the following is the debit or credit balance you would normally find in the account: 
  

• Bank’s Debits and Credits: debiting the Cash account in the general ledger increases its balance, yet your bank says it is crediting your checking account to increase its balance. Similarly, you learned that crediting the Cash account in the general ledger reduces its balance, yet your bank says it is debiting your checking account to reduce its balance. 

ALICE

A: ASSET

L: LIABILITY

I: INCOME

C: CAPITAL

E: EXPENSE

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RPN

Real → Asset → Dr what comes in / Cr what goes out

Personal → Individual Person/ Company → Dr the Receiver / Cr the giver

Nominal → Income/ Expense → Dr the expense / Cr the income