Assets : As assets are placed on the debit side so initial entry of asset is obviously debited. When there is an increase in asset it will be added into the previous figure by writing under the first figure i.e., on debit side and if a figure is to be subtracted it will be recorded on the opposite side i.e., credit. So increase in asset will be debited and decrease in it will be credited. Liabilities : As liabilities are recorded on credit side so initial entries of liabilities are credited, when there is increase in liability it will be added into the previous figure by writing under the first figure i.e., on credit side and simultaneously decrease on the opposite side i.e., on debit side. So increase in liabilities will be credited and decrease in it will be debited. Capital or Owner's Equity : As capital is a liability of the business so rule for liability will be applied for it. Income : Income and profits result into increase in capital which is liability, and increase in liability is credited thus increase in income will be credited and decrease in income will be debited. Expenses or Losses : Expenses result into decrease in capital consequently it is a decrease in liability, thus increase in expenses and losses will be debited and decreases in expenses will be credited. Following are the rules of Debit and Credit Debit : Increase in asset, Increase in expenses/losses, Decrease in liabilities, Decrease in capital/ownership, Decrease in revenue/income. Credit : Decrease in assets, Decrease in Expenses, Increase in liabilities, Increase in revenue/income, Increase in capital/ownership For detail visit www.accountingcoach.com
