The Recording Process
Debits and credits summary
Normal balance debit
Assets and expenses increase
Liabilities, owner’s equity and revenue descrease
Normal balance credit
Assets and expenses descrease
Liabilities, owner’s equity and revenue increase
Assets and Liabilities
Assets – debits should exceed credits.
Liabilities – credits should exceed debits.
The normal balance is on the increase side.
Owner’s investments and revenue increase owner’s equity (credit).
Owner’s drawings and expenses descrease owner’s equity (bedit).
Revenue and Expenses
The purpose of earning revenue is to benefit the owner(s).
The effect of debits and credits on revenue accounts is the same as their effect on Owner’s Capital.
Expenses have the opposite effect : expenses descrease owner’s equity.