Debits and Credits—broken down so you can understand them! In Accounting, money coming in and out of the business is recorded as debits and credits. It's called a double-entry accounting system. 

1. Every transaction in accounting is recorded with a debit and a credit. Quickbooks used to have a debit and a credit column in all the registers, but now Quickbooks labels it “increase and decrease,” which can be confusing. But don’t worry - I've got you covered. 

2. Debits are generally on the left side of the accounting equation.  Debit to increase an Expense or Asset account. A Debit also decreases a liability or equity account. Think of a Debit as increasing an account or incoming money.  (Think: your debit card is a lie!) 

3. Credits are generally on the right-hand side of the accounting equation. A Credit increases a liability, revenue, or equity account and it decreases an asset or expense account. Think of credit as money leaving an account or decreasing money.  

4. Helpful hint:  Remember Credit to decrease it.   For Liability, Equity, and Income accounts, the opposite is true: Credit increases, Debit decreases. (D&D) 

5. Double-Entry System: Every transaction has a double entry – it maintains the balance by ensuring that total debits equal total credits.

6. Accounting Equation: (Assets = Liabilities + Equity) and (income -expenses = Net income)

Now, debits and credits aren’t so intimidating, right? With these simple breakdowns, you’ll be cruising through double-entry bookkeeping in no time! 

Have more questions? Schedule a coaching call with me and we can go through it together! https://coachingbookkeepers.com/coaching