Debits/Credits (Account Characteristics)

(Corporate form of Business)

Normal

Category Balance Increase Decrease

Balance Sheet Accounts:

Asset........................... Debit............ Debit........... Credit

Liability...................... Credit............Credit........... Debit

Owner Equity:

Common Stock....... Credit........... Credit........... Debit

Dividends................ Debit............ Debit........... Credit

Income Statement Accounts:

Revenues.................Credit............ Credit........... Debit

Expenses................. Debit.............Debit.............Credit

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Three Step Process in Determining a Debit or Credit

(1) Identify which of the three elements of the Accounting Equation (A = L + OE) are affected by the transaction.

(2) Determine the specific accounts that are affected, and whether they are being increased or decreased.

(3) Apply the above debit and credit rules, based on the normal balance of each of the accounts affected.

Debits/Credits (Account Characteristics)

(Corporate form of Business)

Assets (Debit Balance)	=	Liabilities (Credit Balance)

(Dr - Increase, Cr - Decrease)	(Cr - Increase, Dr - Decrease)

Cash	Accounts Payable

Accounts Receivable	Salaries Payable

Supplies	Notes Payable

Land	Interest Payable

Equipment	Unearned Revenue

Building

Prepaid Insurance

Prepaid Rent	+

Stockholder Equity

(1) (Cr - Increase, Dr - Decrease)

Common Stock (Credit Balance)

Preferred Stock (Credit Balance)

Pd-In Capital in Excess of Par

(Credit Balance)

Retained Earnings (Credit Balance)

Revenue (Credit Balance)

(2) (Dr - Increase, Cr - Decrease)

Treasury Stock (Debit Balance)

Expenses (Debit Balance)

Dividends (Debit Balance)