Confused with Debit and Credit Procedures

[VictoriaV]

In my textbook it says:
"Investments by owners are credited to the Owner's Capital account. (sort of makes sense) Credits increase this account, and debits increase it. When an owner invests cash in the business, the company debits (increases) Cash and credits (increases) Owner's Capital.

Wait a minute, hold on, didn't they just say that when an owner invests cash in the business that it is credited to the Owner's Capital account and that the credits increase and debits decrease it. Then it says that the debits are increased. What, so which one is it?

And what's the difference between debit and credit?

 

[ItPaysTheBills]

What we all use is called "double entry accounting." For every credit, there is a debit. For every debit, there is a credit.

One sided entries put the balance sheet out of balance - which shouldn't happen.

There are two accounts affected by an owner injecting cash into the business.

We need to recognize that the business now has more cash than it use to, so we debit cash..... because cash is an asset and assets have a normal debit balance (meaning that we debit them to show that their amounts increased).

We also need to recognize that the owner has more equity in the business now, by crediting the OE account, which has a normal credit balance and is thus increased by a credit.

Things like assets, expenses, and loses have normal debit balances, so their amount is increased by a debit and decreased by a credit.
Things like liabilities, revenues, and gains have a normal credit balance, so their amount is increased by a credit and decreased by a debit.

 

[Triest123]

In my textbook it says:
"Investments by owners are credited to the Owner's Capital account. (sort of makes sense) Credits increase this account, and debits increase it. When an owner invests cash in the business, the company debits (increases) Cash and credits (increases) Owner's Capital.

Wait a minute, hold on, didn't they just say that when an owner invests cash in the business that it is credited to the Owner's Capital account and that the credits increase and debits decrease it. Then it says that the debits are increased. What, so which one is it?

And what's the difference between debit and credit?

Debit = Increase in (company's) Assets / Decrease in (company's) Liabilities
Credit = Decrease in (company's) Assets / Increase in (company's) Liabilities

"Capital" you can simply treat it as the company's liability because the money or
assets invested to be returned to the owner when the company is dissolved
providing that the company can repaid all its business debts.

1. Investments by owners are credited to the Owner's Capital account.
It may be something like that "the owner transfer his motor vehicle for use in the business"

(a) Company's asset increased Dr Motor Vehicle
(b) Company's liability to the Owner increased Cr Capital

2. The owner invests cash in the business, that means the owner transfer his
cash to the company to maintain its daily operation.

(a) Company's asset increased Dr Cash
(b) Company's liability to the Owner increased Cr Capital

3. If the owner withdraw cash from the company for his personal use

(a) Company's liability to the owner decreased Dr Drawings (capital)
(i.e to repay the debt owed to the owner, but
we usually use "drawings" instead of
capital )

(b) Company's asset decreased Cr Cash

 

[bruceingram1958]

In a double-entry accounting, you may identify two or more accounts involved in a business transaction. You must debit at least one account and credit at least one account. In order to debit an account, you have to enter an amount on the left side of the account while to credit an account means to enter an amount on the right side. Generally, debit is on the left while credit is on the right. These types of accounts are increased with a debit: Dividends (Draws), Expenses, Assets, and Losses. On the other hand, these types of accounts are increased with a credit: Gains, Income, Revenues, Liabilities, and Stockholders' (Owner's) Equity. To decrease an account, you do the opposite of what was done to increase the account. For instance, an asset account is increased with a debit and thus, it is decreased with a credit.