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Debit and Credits on a Balance Sheet, Cheat Sheet of Financial Accounting

Cheat sheet for debit and credit entries

Typology: Cheat Sheet

2020/2021

Uploaded on 04/26/2021

ryangosling
ryangosling 🇺🇸

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Debits and Credits
February 2014
PowerChurch: Debit or Credit???
Does this picture remind you of anyone?? Choosing between debits and credits when making
accounting entries can be confusing!
Deciding whether to use a debit or credit in an entry is easier when you understand how a debit or
credit will affect the account to which you are making the entry.
Every chart of account line item has a normal debit balance or a normal credit balance.
See the chart below:
Balance Sheet Normal Balances
Assets Debit (Debit adds; Credit decreases)
Liabilities Credit (Credit adds: Debit decreases)
Equity Credit (Credit adds: Debit decreases)
Income Statement Normal Balances
Expenses Debit (Debit adds; Credit decreases)
Income Credit (Credit adds; Debit decreases)
The first thing you must determine is:
Are you going to make the balance in the line item higher (adding)?
Or, are you going to make the balance in the line item lower (decreasing)?
Once you have answered the above question, plug your entry into the chart shown earlier. Let's use the example
of making a journal entry for a bank service charge.
1. You are decreasing the balance in an asset (your checking account)
2. You are increasing the balance in an expense (Bank Fees)
Balance Sheet Normal Balances
Assets Debit (Debit adds; Credit decreases)
Liabilities Credit (Credit adds: Debit decreases)
Equity Credit (Credit adds: Debit decreases)
Income Statement Normal Balances
Expenses Debit (Debit adds; Credit decreases)
Income Credit (Credit adds; Debit decreases)
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Debits and Credits

February 2014

PowerChurch: Debit or Credit???

Does this picture remind you of anyone?? Choosing between debits and credits when making accounting entries can be confusing!

Deciding whether to use a debit or credit in an entry is easier when you understand how a debit or credit will affect the account to which you are making the entry.

Every chart of account line item has a normal debit balance or a normal credit balance.

See the chart below:

Balance Sheet Normal BalancesAssets – Debit (Debit adds; Credit decreases)Liabilities – Credit (Credit adds: Debit decreases)Equity – Credit (Credit adds: Debit decreases)

Income Statement Normal BalancesExpenses – Debit (Debit adds; Credit decreases)Income – Credit (Credit adds; Debit decreases)

The first thing you must determine is: Are you going to make the balance in the line item higher (adding)? Or, are you going to make the balance in the line item lower (decreasing)?

Once you have answered the above question, plug your entry into the chart shown earlier. Let's use the example of making a journal entry for a bank service charge.

  1. You are decreasing the balance in an asset (your checking account)
  2. You are increasing the balance in an expense (Bank Fees)

Balance Sheet – Normal BalancesAssets – Debit (Debit adds; Credit decreases)Liabilities – Credit (Credit adds: Debit decreases)Equity – Credit (Credit adds: Debit decreases)

Income Statement – Normal BalancesExpenses – Debit (Debit adds; Credit decreases)Income – Credit (Credit adds; Debit decreases)

Your journal entry will be: Credit Checking Debit Bank Fees Expense

To make the entry in PowerChurch, go to Accounting-Fund Accounting-Enter Transactions

Complete the entry.

Save and post.