Gggrrrrr! Accounting!

[Tubby & Peanut's Mom]

To make you even more confused.....

It depends on if you are working with an asset account, or a liability ar capital account.

An easy way to think of it is asset is a good thing - a plus - so debits are plusses - you're increasing the asset account with a debit making the balance bigger.

Credit accounts are bad things - a negative - so debits are minuses to them - you're decreasing a liability with a debit.

On the other hand, if you have an asset account that you want to decrease, you would credit that account. The value of the asset is decreased by a credit.

And conversely, on a liability account, a credit would increase the amount of the liability account.

I learned accounting long before computers (my first accounting class was in 1977!) and we learned the old fashioned way with T accounts. Do you know what a T account is? If not, here's a simple explanation:

Asset Account
Debit|Credit
+ + |- -
+ + |- -

Liability/Capital Account
Debit|Credit
- - -|+ + +
- - -|+ + +

The T's do not line up too well here, but draw a T on a piece of paper and insert what I've typed here.

DO NOT use the bank as an example. All that ever did was confuse me. They do it different than you would think because to them your account is a liability whereas to you it's an asset, so forget how the bank does it.

So, to figure out if a debit or a credit is a plus or minus, determine which account you are dealing with Asset or Liability. T accounts are a wonderful thing in helping you to visualize what is going on. For every debit there must be a credit.....well...I could go on and on.....

Let me know if this helps or if you still have questions. The boss just walked in, but I can sneak a reply in now and then.