Newbie question: Is a "debit" a decrease or increase to account?


M

me6

Can you help a brother out?

Im taking an elementary accounting class at local
community college. Never had ANY accounting ever....
not even in high school. Im 46 and just wanted to take
this class.

Having said that Im struggling a bit with the class.
Maybe cause some of the "concepts" are a bit alien to
me.

We are studying the "accounting equation" which says
that Assets= Liabilities + Owners Equity.

One Im really having problems with is that i was told
that a debit is a decrease to an account. In other
words if you debit a "supplies" account you are
subtracting. And a credit was an increase to an acct.

Is this true for all accounts no matter what side of
the equation they are on?

To me... when you credit an account you are putting
money into it.....such as when I returned something i
bought with a Visa card they will say "we will credit
your acct" with the cost amt.

Any way to help me get clear on this concept?

thanks in advance!
 
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J

Joe Bruno

Subject: Newbie question: Is a "debit" a decrease or increase to account?
From: (e-mail address removed)
Date: 9/8/2004 12:55 PM Pacific Daylight Time
Message-id: <[email protected]>

Can you help a brother out?

Im taking an elementary accounting class at local
community college. Never had ANY accounting ever....
not even in high school. Im 46 and just wanted to take
this class.

Having said that Im struggling a bit with the class.
Maybe cause some of the "concepts" are a bit alien to
me.

We are studying the "accounting equation" which says
that Assets= Liabilities + Owners Equity.

One Im really having problems with is that i was told
that a debit is a decrease to an account. In other
words if you debit a "supplies" account you are
subtracting. And a credit was an increase to an acct.

Is this true for all accounts no matter what side of
the equation they are on?

To me... when you credit an account you are putting
money into it.....such as when I returned something i
bought with a Visa card they will say "we will credit
your acct" with the cost amt.

Any way to help me get clear on this concept?

thanks in advance!

Whether a debit is an increase or decrease depends on which account it's made
to. Generally, debits INCREASE assets and expenses and decrease income
,liabilities, and net worth.

That's because assets and expenses generally have debit balances.

The reverse is true for credits.


Joe Bruno

Si vis pacem, para bellum
(If you want peace, prepare for war)
Ancient Roman Motto

Visit my web page for pictures, music, and accounting services
http://www.msnusers.com/Joepictures2008/shoebox.msnw
 
P

Paul

Im taking an elementary accounting class at local
community college. Never had ANY accounting ever....
not even in high school. Im 46 and just wanted to take
this class.

Having said that Im struggling a bit with the class.
Maybe cause some of the "concepts" are a bit alien to
me.

We are studying the "accounting equation" which says
that Assets= Liabilities + Owners Equity.

One Im really having problems with is that i was told
that a debit is a decrease to an account. In other
words if you debit a "supplies" account you are
subtracting. And a credit was an increase to an acct.

Is this true for all accounts no matter what side of
the equation they are on?

To me... when you credit an account you are putting
money into it.....such as when I returned something i
bought with a Visa card they will say "we will credit
your acct" with the cost amt.

Any way to help me get clear on this concept?


You have to know what type of account it is to know if a debit or credit
increases or decreases it.

Assets and expense accounts are generally debit balance accounts, and as
such, a debit to those accounts increases the account,

Example: You buy a car for cash. The entry is to debit the "Vehicle" asset
account and credit cash. Cash goes down because you wrote the check, and
Vehicles goes up because by the price of the new car.

Example: You write the check for the power bill. You debit "Utilities" and
credit the bank.

Liabilities, income and equity are credit accounts, and as such, a credit to
those accounts increases them, while a debit to those accounts decreases
them.

Example: You borrow $50,000. Credit "loan payable" and debit the bank for
the deposit.

Example: You make a loan payment (pay attention because this gets tricky).
You credit the bank for the amount of the check, and you debit the loan
payable for the principle amount and debit the expense account for the
interest portion.

Make a cheat card for yourself that reads in part:

Debits ! Credits
----------+-----------
Assets ! Liabilities
Expenses ! Income
! Equity

In fact, get the guy who sits in front of you to tattoo it to his butt.
 
S

S.M. Serba

Can you help a brother out?

Im taking an elementary accounting class at local
community college. Never had ANY accounting ever....
not even in high school. Im 46 and just wanted to take
this class.

Having said that Im struggling a bit with the class.
Maybe cause some of the "concepts" are a bit alien to
me.

We are studying the "accounting equation" which says
that Assets= Liabilities + Owners Equity.
Correct. Remember which sides are increased by debits or credits like this:

Assets are on the left side of the equation, therefore increases are debits.

Liabilities and Owner's Equity are on the right side of the equation,
therefore increases are credits.

Decreases are the opposite. If an account is INCREASED by a DEBIT, it is
DECREASED with a CREDIT.
If an account is INCREASED with a CREDIT, it is DECREASED with a DEBIT.

These concepts will be easier to understand once you get into T-accounts.

To complicate things further, once you get farther in your studies there are
contra-asset and contra-liablilty accounts!
One Im really having problems with is that i was told
that a debit is a decrease to an account. In other
words if you debit a "supplies" account you are
subtracting. And a credit was an increase to an acct.
Whatever you do to one side of the equation, you must do the opposite on the
other side. You can make multiple entries on all sides.
EG. Post 2 debits and a credit to the assets side, and a debit to the
Liabilities and a credit to Owner's Equity. AS long as the total debits
equals the total credits!
Is this true for all accounts no matter what side of
the equation they are on?
Remember: Assets are increased with DEBITS and decreased with CREDITS.
Liabilites and Owner's Equity are increased with CREDITS and decreased with
DEBITS.

To me... when you credit an account you are putting
money into it.....such as when I returned something i
bought with a Visa card they will say "we will credit
your acct" with the cost amt.
Credit cards and bank accounts are treated backwards by banks compared to a
set of books you are working on.

This is why: to the business, a bank account is an asset and you increase
the balance by making deposits that are recorded in the
books as DEBITS. To the BANK, YOUR bank account is a LIABILITY, and
liabilities are recorded by CREDITS. Therefore
when you get your bank statement, withdrawls and cheques are THEIR debits,
and deposits are THEIR credits!

Your credit card is your LIABILITY and the banks ASSET! Your purchases
increase your debt to the bank and are your CREDITS
and their DEBITS.
Any way to help me get clear on this concept?

thanks in advance!
If you want any more help, feel free to email me offline!


--
Stephanie Serba, AICIA
Partner, Durham Business Outsource
Accounting & Technology
smserba <at> dbo <dot> ca
www.dbo.ca
 
M

me6

If you want any more help, feel free to email me offline!

Wow!

Gee thanks guys!! Great info!!

I will have to re-read the replies a few more times to
get it to sink in. <G>

Again..... it all a bit alien to me having never had
any accounting classes at all.

Im sure I will have more questions in time
 
M

me6

These concepts will be easier to understand once you get into T-accounts.

Staring to get into them as we speak
To complicate things further, once you get farther in your studies there are
contra-asset and contra-liablilty accounts!
Oh boy!

I wont even worry abt them for now!
 
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K

Kim

1. Basically, I think the key is to remind yourself that you are
thinking always from the BUSINESS perspective, not the customer
perspective. A customer wants the bank to credit them some cash.
When the bank credits that customer though, it's a debit to their
business cash balance.

2. When a business "debits" cash (an asset), cash goes up. The
T-account increases on the left side. How did the business get that
cash? Sales? If so, you would "credit" Sales. Sales increases on
the right side of the T-account.

3. Really, you just have to memorize the major accounts and if they
normally either have a debit or credit balance. It sucks, but the
only thing that helps is working with them over time. Like Equity has
a credit balance normally (increases on the right)---but it is made up
of other things like Revenue, Expenses, etc and those might not all
increase in the same way.

4. Another thing I've learned is that just because something is
"debit" or "credit" doesn't mean it's a negative or positive. When
you debit CASH, you might have had a sale (which is good), but you
might have also borrowed that cash and hence your liability also
increases.
 
T

TWallen327

I teach people to use the rules of ALICE -

Increase Decrease
A ssets + -
L iabilities - +
I ncome - +
C apital - +
E xpense + -

Where the + equals the debit and the - equals the credit.

Hope this helps.
 
M

me6

I teach people to use the rules of ALICE -
Increase Decrease
A ssets + -
L iabilities - +
I ncome - +
C apital - +
E xpense + -

Where the + equals the debit and the - equals the credit.

Hope this helps.
Yep.....they may help quite a bit!

Thanks!
 
Z

Zergrinch

(e-mail address removed) wrote in 4ax.com:
Can you help a brother out?

Im taking an elementary accounting class at local
community college. Never had ANY accounting ever....
not even in high school. Im 46 and just wanted to take
this class.

Having said that Im struggling a bit with the class.
Maybe cause some of the "concepts" are a bit alien to
me.

We are studying the "accounting equation" which says
that Assets= Liabilities + Owners Equity.

One Im really having problems with is that i was told
that a debit is a decrease to an account. In other
words if you debit a "supplies" account you are
subtracting. And a credit was an increase to an acct.

Is this true for all accounts no matter what side of
the equation they are on?

To me... when you credit an account you are putting
money into it.....such as when I returned something i
bought with a Visa card they will say "we will credit
your acct" with the cost amt.

Any way to help me get clear on this concept?

thanks in advance!
DEBITS to:
Assets
Expenses
INCREASE these amounts. CREDITS decrease them.

DEBITS to:
Liabilities
Capital (Equity)
Revenues
DECREASE these amounts. CREDITS increase them.

Thus, if the Bank puts money in your bank account, they CREDIT it
(because your bank account is actually their debt (a liability) for
them, But, for your intents and purposes, it's a DEBIT for you...

Capisce?
 
M

me6

DEBITS to:
Assets
Expenses
INCREASE these amounts. CREDITS decrease them.

DEBITS to:
Liabilities
Capital (Equity)
Revenues
DECREASE these amounts. CREDITS increase them.

Thus, if the Bank puts money in your bank account, they CREDIT it
(because your bank account is actually their debt (a liability) for
them, But, for your intents and purposes, it's a DEBIT for you...

Capisce?
Thanks!

That helped a lot!
 
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M

me6

DEBITS to:
Assets
Expenses
INCREASE these amounts. CREDITS decrease them.
But when you say debits increase Expenses it increases them in the
NEGATIVE value, correct?

If my car fuel expenses are currently $100 and i debit them another
$100.... my total car fuel expense cost is now negative $200, right?
 
P

Paul A Thomas

But when you say debits increase Expenses it increases them in the
NEGATIVE value, correct?

If my car fuel expenses are currently $100 and i debit them another
$100.... my total car fuel expense cost is now negative $200, right?

In accounting, when you say "negative $200" for fuel expense, people conjure
up you getting money for buying gas.

Since fuel expense, indeed all expenses, are a debit balance account, a
negative debit account is, by most people's guess, a credit sitting there,
and a potential problem to be addressed.

Same for asset accounts. The checking account is a debit balance account.
If you were to debit the bank you increase the bank balance. A negative
bank balance means overdrawn funds, and a problem to address.

Debits and credits aren't negatives and positives even though they appear
that way in a trial balance report.
 
M

me6

Debits and credits aren't negatives and positives even though they appear
that way in a trial balance report.
Yep..... that's what Im learning

But man Im having a hard time with that!! Haha

For some reason it was in my head that debit and credit had positive
and negative connotations but that aint so, huh?
 
S

S.M. Serba

The easiest way to remember debits and credits is with the accounting
equation:

Assets = Liabilities + Owners Equity

Assets are on the left, left side accounts are increased with debits. The
normal balance of an asset account is a debit balance.
Liabilities and Owner's Equity are on the right, right side accounts are
increased with credits. The normal balance of a liability or equity account
is a credit balance.

Expenses are increased with debits like assets.

Revenues are increased with credits like liabilities and equity.

There are no negatives or positives in accounting. Just accounts with normal
debit or credit balances.

______Bank_______
50 |

This represents a bank account with a debit of $50 (you HAVE $50)


_____Gasoline______
| 100

This represents a gasoline expense account of $100 (you have SPENT $100)



______Owner______
| 5000


This represents an owners equity account with a balance of $5000 (the
business owner has $5000 invested in the company either through direct cash
or asset contributions, or from retained earnings from prior periods).


_______Bank________
50 | 25

This represents the same bank account you started out with $50, but you
spent or withdrew $25. Opening debit balance of $50, credit posted of $25,
net debit balance of $25...


The only time where it would be appropriate to equate a "negative" balance
in an account is when the account's net balance is the OPPOSITE of it's
normal balance. EG. When the bank has a credit balance (you're overdrawn) or
when a liability account has a debit balance (did you overpay a
vendor/supplier?)


--
Stephanie Serba, AICIA
Partner, Durham Business Outsource
Accounting & Technology
smserba <at> dbo <dot> ca
www.dbo.ca
 
J

JohnB

Yep..... that's what Im learning

But man Im having a hard time with that!! Haha

For some reason it was in my head that debit and credit had positive
and negative connotations but that aint so, huh?

You are tripping over a difference between "accountant's English"
and "editor's English." Most editors look at their bank
statement where credits are good [increase depositor's balance]
and debits are bad [reduce depositor's balance] because you are
looking at a statement of the BANK's books and thus use "he was a
credit to his firm" as a compliment. When you are doing
bookkeeping the "bank" account is an asset which normally runs a
debit balance and for which debits are good [increase the amount
of cash in bank] and credits are bad [reduce the amount of cash
in bank. Try to think of debit and credit as neutral words like
plus and minus with no connotation of good or evil.

I suffered through that one in 1956 when I took introductory
accounting.
 
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S

S.M. Serba

S.M. Serba said:
The easiest way to remember debits and credits is with the accounting
equation:

Assets = Liabilities + Owners Equity

Assets are on the left, left side accounts are increased with debits. The
normal balance of an asset account is a debit balance.
Liabilities and Owner's Equity are on the right, right side accounts are
increased with credits. The normal balance of a liability or equity account
is a credit balance.

Expenses are increased with debits like assets.

Revenues are increased with credits like liabilities and equity.

There are no negatives or positives in accounting. Just accounts with normal
debit or credit balances.

______Bank_______
50 |

This represents a bank account with a debit of $50 (you HAVE $50)


_____Gasoline______
| 100

This represents a gasoline expense account of $100 (you have SPENT $100)
WHOOPS! Just found my own error! See what happens when you answer the
telephone in mid-thought!

_____Gasoline______
100 |

This represents a gasoline expense account of $100 (you have SPENT $100)


_____Sales______
| 500

This would represent a sale of goods or services of $500
 
F

Freelunch

On Tue, 21 Sep 2004 15:58:42 -0500, in alt.accounting
Yep..... that's what Im learning

But man Im having a hard time with that!! Haha

For some reason it was in my head that debit and credit had positive
and negative connotations but that aint so, huh?
It's a pain when you use a model that was developed before negative
numbers became a common concept.
 
P

Paul A Thomas

JohnB said:
You are tripping over a difference between "accountant's English"
and "editor's English." Most editors look at their bank
statement where credits are good [increase depositor's balance]
and debits are bad [reduce depositor's balance] because you are
looking at a statement of the BANK's books

Yes, and to confuse you more, on the bank's books, your checking account is
a liability (something the bank owes to you). On your books, your bank
account is an asset.
 
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M

me6

I suffered through that one in 1956 when I took introductory
accounting.
Yep

That's my problem too! :)

I never had any accounting at all ... even in high
school. Im 46 so high school was in the mid seventies
 

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