RULES OF DEBIT AND CREDIT

RULES OF DEBIT AND CREDIT

DEBIT is another name for the Left-hand side of all types of accounts.
CREDIT is another name for the Right-hand side of all types of accounts.

Whether you make a T account or follow the standard format of Ledger Account the Debit amounts will be written on the left side and Credit amounts will be written on the right side.

As the normal balance of an account is usually:
DEBIT for Asset Accounts
CREDIT for Liability Accounts
CREDIT for Equity Accounts
CREDIT for Revenue / Sale Accounts
DEBIT for Expense / Cost Accounts

Therefore,
A Debit Entry in Asset Account signifies INCREASE
A Debit Entry in Liability Account signifies DECREASE
A Debit Entry in Equity Account signifies DECREASE
A Debit Entry in Revenue Account signifies DECREASE
A Debit Entry in Expense Account signifies INCREASE

And accordingly,
A Credit Entry in Asset Account signifies DECREASE
A Credit Entry in Liability Account signifies INCREASE
A Credit Entry in Equity Account signifies INCREASE
A Credit Entry in Revenue Account signifies INCREASE
A Credit Entry in Expense Account signifies DECREASE

In other words, we may also say, that in case a business transaction has an effect of increase in an asset account, then the amount should be placed to its Debit side (Left-hand side). Accordingly, follow the above mentioned rules for other types of accounts.

For any business transaction, minimum two accounts are affected, so you must Debit one account and Credit one account.

The above rules for Debit and Credit can also be understood in another way.

For all REAL Accounts
Debit what Comes-in
Credit what Goes-out

For all PERSONAL Accounts
Debit the Benefit Receiver
Credit the Benefit Giver

For all NOMINAL Accounts
Debit all Expenses / Cost / Losses Accounts
Credit all Revenue / Sale / Income Accounts