Understanding Debits and

Credits in Accounting

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Presentation Outline
I.

An Account
II. Normal Balances
III. Recording and Posting Transactions

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I. An Account
A. Three Parts of an Account
B. Determining the Balance of an
Account
C. Balance Examples

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A. Three Parts of an Account

(1) Account Title
(2) Left Side

(3) Right Side

is a Debit

is a Credit

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B. Determining the Balance of an

Account
Obtain a total for both debits if credits.
If:
Total Debits > Total Credits = Debit Balance
Total Debits < Total Credits = Credit Balance
Total Debits = Total Credits = Zero Balance

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C. Balance Examples
What is the balance of the following accounts:

Cash

Accounts Payable

12,000

2,000

3,000

6,000

2,000

1,000

2,000

9,000

11,000

10,000

Debit

Credit

Balance

Balance

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II. Normal Balances

A. Increasing and Decreasing Accounts
B. Account Normal Balances
C. Components of Owners Equity

What is
normal
for you?

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A. Increasing and Decreasing

Accounts

Accounts have a normal balance of either a

debit or a credit (but not both).
An entry on the side of an accounts normal
balance will increase the account.
An entry on the opposite side of an accounts
normal balance will decrease the account. C2 - 8

B. Account Normal Balances

Assets

Liabilities

Capital

Debits

Credits

Debits

Credits

Debits

Credits

Increase

Decrease

Decrease

Increase

Decrease

Increase

Normal

Normal

Normal

Balance

Balance

Balance

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C. Components of Owners Equity

Negative Components of
Owners Equity
Withdrawals

Expenses

Positive Component
Of
Owners Equity

Revenues

Debits

Credits

Debits

Credits

Debits

Credits

Increase

Decrease

Increase

Decrease

Decrease

Increase

Normal

Normal

Normal

Balance

Balance

Balance

Remember that the normal balance of owners equity is a

credit.

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