Debits and Credits Summarized

Through the use of T accounts, debits, and credits, the double-entry system used in accounting guarantees that the accounting equation always balances. The effects of business events on a company's resources and sources of resources are entered as debits and credits in T accounts. A debit is an entry to the left side of a T account, while a credit is an entry on the right side of a T account. The debit and credit rules to record the effects of business events are summarized below. The data in perentheses in the debits column and credits column refer to the specific event of the Guitar Lessons Corporation, discussed in the previous section, in which the debit or credit rule was developed. For example, the assets increase with debits rule was first developed in event number one.






Increase: (1) 

Decrease: (1) 


Decrease: (4) 

Increase: (2) 

Stockholders' Equity 

Decrease: (6) 

Increase: (3) 



Increase: (3) 


Increase: (7) 



Increase: (6) 



Although the information in the above table might appear to be a bit intimidating, in fact the debit and credit process is relatively easy. As the following chapters will illustrate, most business events can be converted into debits and credits through the use of the following two points:


Point 1: Debits = credits

Point 2: Assets increase with debits



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