Anonymous asked in Business & FinanceCorporations · 1 decade ago

How to differentiate between debits and credits when working on fianancial statements?

When workingwith a ledger I dont always know when to post a debit or if its a credit

6 Answers

  • 1 decade ago
    Favorite Answer

    In the actual ACCOUNTING world, a debit is entered on the right side of a ledger and a credit is entered to the left. Also, remember the accounting equation, Assets = Liabilities + Owners' Equity. Assets are generally debited to increase the value and credited to decrease the value. Liabilites and Owners' Equity are the opposite. Expenses are debited whereas revenue is credited (to increase values).

    The easiest way to remember it is ALOE REX and DCCCD (aloe rex and "d triple cd")

    Here's the model for that:

    A L OE R EX

    l l l l l

    D C C C D

    In case you can't tell:

    A = asset

    L = liability

    OE = owners' equity

    R = revenue

    EX = expense

    Now, if you're talking about a check register.... it's the total opposite. A debit decreases cash and a credit increases cash. The bank prints all of the check registers to match THEIR ledgers. In other words, when you spend money, it decreases their liability to you. When you add money it increases their liability.

    Hopefully that makes sense.....

    Source(s): College
  • Anonymous
    1 decade ago

    Asset accounts, Debit = increase, Credit = decrease.

    Liability & Equity accounts, Debit = decrease. Credit = increase.

    Example: You borrow $1000 from the bank, you want to record an increase in cash (asset) and an increase in debt (liability).

    Debit Cash $1000

    Credit Loan Payable $1,000

  • 4 years ago

    Debit Card - employing money that are available on your checking account. It has 2 ideas to apply credit or Debit. Debit basically takes it as we talk on an identical time as credit will take a pair days to retrieve the funds out of your account. credit card - Is a definite credit that they furnish you. for example you have $2000 credit shrink. you ought to use it as much as that quantity yet you will ought to pay the minimum month-to-month money which is composed of pastime. particularly it fairly is borrowing funds. besides the fact that, that's continuously reliable to have credit taking part in cards to construct credit. basically use it properly and pay the month-to-month money on time.

  • Anonymous
    1 decade ago

    Debits are the monies taken out of an account immediately when the transaction is complete. While credits are processed, then either approved or denied then taken from the issuers bank or financial institution, and paid back later by the creditor.

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  • 1 decade ago

    Think of it as "Yoko Ono" accounting-

    Accounts on the left side of the equation are what you Own.

    Thoseon the right are what you Owe.

    Left equals debits, right equals credits.

    Think about this: a bank "credits" your account-why? Because they OWE you the money.

    This sounds confusing but it is true.

    The accounting equation, in simple terms is:

    Debits=Credits + Net Worth

    Once you pay what you owe, what is left is your net worth.

  • 1 decade ago

    debits cards will stop when you have no more money inyour bank account.

    credits cared never stop so they can put you into dept

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