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Cheat sheet for debit and credit entries
Typology: Cheat Sheet
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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.
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)
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.