Debit / Credit Technics to learned easily

It is simply saying increase and decrease but in accounting language, or accountants language!

You see, if you say “increase assets”, it will be the very same thing as saying “debit assets”, but most probably only an accountant will understand the latter, because it is said in accounting language. 🙂

All you have to do is know the nature of the accounts. E.g. A liability account is credit in nature, therefore, any increase in it will be recorded as credit and of course any decrease will be the opposite i.e debit…and it goes the same for all accounts, learn the nature of the account, once you learn it, you will be able to know how to record a decrease or increase in this account.

It is very easy, maybe a little confusing at the beginning, but very easy once you learn the basics.

Maha

@tabsom – Not necessarily, if more capital is invested (coming in) you will credit the capital account, when it is something added to the business, it is not going out! Debit is what comes in and credit is what goes out only when BOTH accounts are debit in nature (i.e. asset), and it worked out well in your example because you gave an example of an asset.

Thank you. Your point of view is clear now 🙂

hey guys i am Ruth , form Trinidad and i am new to this site and also having trouble understanding this business of debits and credits. Mahoysam, you seem to be great at simplifying things, can you give a more detailed example of a ledger account using decreases and increases instead of debits and credits? Thanks alot for your support in this matter and best regards. Tabsom anything you can add will also be very helpful to me. thank you guys, Ruth

@Ruth – Sure, I would love to explain more, but I will also suggest you follow the link because I am sure it is very useful.

I would agree with tabsom on what he said, yet I still find his rule not very accurate giving that expenses are debit balances and expenses go out! I am not sure if he has an explanation for this.

Anyways, the way I learned about debit and credit is that they are used interchangeably to say increase and decrease, how can we determine whether a debit in a certain transaction will be an increase or a decrease? You have first to learn the nature of the accounts, it will either be a debit account or a credit account in nature.

If it is a credit account, then an increase in the account will be recorded as credit and of course consequently the decrease in the account will be recorded as debit. If it is a debit account, it is the same logic, the increase will be debit and of course the decrease will be credit.

You have your balance sheet divided into two sides: One side is Assets and the other side is liability and Equity, simply, one side is debit and the other side is credit in nature as follows:

Assets = Debit in nature. (since it is debit in nature, any increase in Assets is a debit).
Liability and Equity = Credit in nature. (since it is credit in nature, any increase in liability and Equity is a credit).

However, under Equity, we also have:

Revenue accounts: Credit in nature (since it is credit in nature, any increase in revenue is a credit).
Expense accounts: Debit in nature (since it is Debit in nature, any increase in Expenses is a Debit).

I know the last bit is kind of confusing, we said earlier that the side of Liability and Equity is credit in nature (therefore any increase will be credit), why then Expenses which come under equity are debit in nature and consequently any increase in Expenses is a debit?

Think of it this way, Expenses actually decrease equity as there is money going out and since it decreases Equity, how should it be recorded? Let’s revise, Equity is credit in nature, any increase is a credit and any decrease is debit, therefore, expenses are recorded as debits because they have the effect of decreasing Equity.

Maybe it is a bit confusing, but if you just learn the nature of the main accounts very well, there shouldn’t be a problem, please let me know if anything I said was not clear.

Good luck!

Maha