Here are five tips to make learning debits and credits easier:
- The accounts for expenses are nearly always debited. For example, when a company pays its monthly rent, it debits Rent Expense. If it runs an ad on the radio, it will debit Advertising Expense.
- The accounts for revenues are almost always credited. When a bakery sells its products, it credits Sales. When a bank earns interest on its loans, it credits Loan Interest Revenues.
- When a company issues a check, it credits the asset account Cash.
- When a company receives money, it debits Cash.
- Every transaction will require a debit to at least one account and a credit to at least one other account.
Here are two examples to illustrate our five tips.
- A bakery records its cash sales at a local market with a debit to Cash and a credit to Sales.
- A company records its $400 payment to repair its delivery van with a debit to Vehicle Repair Expense and a credit to Cash.