Another look. Debit (Dr) and Credit (Cr) only refer to which side of the double entry an account/value goes to. Debit on left, and Credit on right. The normal of an account refers to which side it normally increases on, whether it be good or bad for the company.
The D.E.A.D. C.O.I.L. Mnemonic
- Debit side
- Expenses
- Assets
- Drawing (of Equity)
- Credit side
- Owner's Equity
- Income
- Liabilities
Another-nother look.
Debit/Credit-ishness of an account comes from the elements of the accounting equation, Owner's Equity=Assets - Liabilities, and lots of flipping.
Start by looking at the Dr. side.
- If your account is an Equity term, flip it.
- Equity terms are Capital, Drawing, Income, Expenses. These are the financial borders of the business.
- If it's a Liability, flip it.
- Liabilities are negative (well, it's good to have access to resources now, but they still are a hole that demands filling). Remember, if somebody prepaid you for a something you haven't fulfilled, that's a liability too!
- If is an "evil parallel universe" form of an Asset, Liability,or Equity, then flip it
(again, if need be).
- Expenses are equity accounts, in a negative way. Drawing is a negative overlay to Capital, and gets flipped here, too. Depreciation (an overlayed contra-asset), flips as well.
- You now know the normal of the account. One last flip if the account needs to be reduced.
Within all of this flipping, Debit/Credit has two meanings, whether a term is negative to the company's finances, and whether it is external to the company. By demanding each entry set to balance, the journal tracks motions of money (or widgets, labor..) in the company. Changes of value are expressed as a motion into yet another account, such as moving part of the "Merchandise" Asset (as Cr) into the "Damaged Goods" Expense (as Dr).
As a mnemonic device for students: Note that only Assets and Expenses show an Increase for Debits and Decrease for Credits. All other accounts are the reverse. First memorize the acronyms AID (Assets Increase Decrease) & EID (Expenses Increase Decrease)and then keep in mind that the table reads Debits on the left and Credits on the right.
Debit/credit
|
Account |
Debit |
Credit |
Account Debit Credit |
|---|---|---|---|
|
Assets |
Inc. |
Dec. |
A I D |
|
Expenses |
Inc. |
Dec. |
E I D |
|
Liabilities |
Dec. |
Inc. |
|
|
Shareholder Equity |
Dec. |
Inc. |
|
|
Revenue |
Dec. |
Inc. |
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