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Is it a Credit or a Debit?

“How do I know which account I credit and which I debit?”

Below are some basic tips to think about when you are confronted with which way to make an entry on the General Ledger. Asset Accounts normally have debit balances.

1. Liability Accounts normally have credit balances.
2. Equity Accounts normally have credit balances.
3. Income Accounts normally have credit balances.
4. Expense Accounts normally have debit balances.
5. All Debits and Credits must equal for the accounting equation to balance.
6. Debits represent increases to Assets and Expenses.
7. Credits represent increases to Liabilities, Equity, and Income.
8. Debits represent decreases to Liabilities, Equity, and Income.
9. Credits represent decreases to Assets and Expenses.