Understanding Credits and Debits - Quick Links

Double-entry Bookkeeping
Debits Left - Credits Right
Examples of Debits and Credits
The Summary Chart

Double-entry Bookkeeping


ACS is a Double-entry Bookkeeping system.

Debits Left - Credits Right


Debits and credits are the backbone of accounting.

You can split debits and credits between accounts, but the totals self-balance in the double entry bookkeeping system. To split debits and credits between checking accounts, the checking accounts must be associated with the same bank account in the chart of accounts.

Debits and credits DO NOT NECESSARILY EQUATE TO INCREASES AND DECREASES. The effect of a debit or a credit on an account depends upon the classification or type of the account.

Examples of Debits and Credits


Example 1

You receive $200.00 in cash for the general offering. You deposit the cash in the bank to the general checking account. Your entries in ACS are:

Debit — General checking account (Asset account type — increases balance)

Credit — General offering account (Revenue account type — increases balance)

Example 2

You receive the electric bill for the month which is $200.00. You issue a check for $200.00 to pay the bill. Your entries in ACS are:

Debit — Utilities account (Expense account type — increases balance)

Credit — General checking account (Asset account type — decreases balance)

Example 3

You realize that the $200.00 that you credited in Example 1 to the general offering account was designated for the youth camping trip. You need to move the funds to the correct account. Your entries in ACS are:

Debit — General offering account (Revenue account type — decreases balance)

Credit — Youth activities account (Revenue account type — increases balance)

Example 4

You write a check to the IRS to pay your payroll taxes for the month. Your entries in ACS are:

Debit — Payroll taxes withheld account (Liability account type — decreases balance)

Credit — General checking account (Asset account type — decreases balance)

The Summary Chart


Debits increase asset and expense accounts, while they decrease revenue, liability, restricted, and fund principal accounts. Credits increase revenue, liability, restricted, and fund principal accounts, while they decrease asset and expense accounts.

Below are a couple of tables to help you understand and remember how debits and credits affect your accounting balances:

Type of Account

What Does a Debit Do?

What Does a Credit Do?

Assets

Increases

Decreases

Liabilities

Decreases

Increases

Fund Principal

Decreases

Increases

Revenues

Decreases

Increases

Expenses

Increases

Decreases

Restricted

Decreases

Increases

Type of Account

Where are the Increases Recorded?

Where are the Decreases Recorded?

Assets

Debit Column

Credit Column

Liabilities

Credit Column

Debit Column

Fund Principal

Credit Column

Debit Column

Revenues

Credit Column

Debit Column

Expenses

Debit Column

Credit Column

Restricted

Credit Column

Debit Column

General Ledger - Chart of Accounts
Chart of Accounts Worksheets
Working with Account Headings and Subheadings
Working with Accounts
Working with Account Views
Printing the Chart of Accounts
About Accounts and Account Types