In a Journal Entry transaction, the Credit and Debit entries play different roles depending on the type of account involved.
Asset Accounts (e.g., Bank Accounts)
- Debit: Increases the balance
- Credit: Decreases the balance
Liability Accounts (e.g., Credit Cards)
- Debit: Decreases the balance
- Credit: Increases the balance
Expense Accounts (e.g., Utilities, Office Supplies)
- Debit: Increases the balance
- Credit: Decreases the balance
Revenue Accounts (e.g., Sales, Service Income)
- Debit: Decreases the balance
- Credit: Increases the balance
Equity Accounts (e.g., Owner’s Capital, Retained Earnings)
- Debit: Decreases the balance
- Credit: Increases the balance