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)
