Rules of Debit and Credit

In bookkeeping, instead of using additions '+' and subtraction '-' symbols, a transaction uses the symbol DR (Debit) for “+” or CR (Credit) for “-“.

In double-entry bookkeeping debit is used for asset and expense transactions and credit is used for liability, gain and equity transactions.

Simplest Format

Best way to remember, the debit and credit rule is

1.       Firstly find Two accounts in a single entry

2.       Then find its nature that is Asset, Expense, Liability, Income/Revenue, or Owner’s equity

3.        Last is it increase or decrease

Remembering Point

“Always make entry from Debit to Credit “  (See example below)

Debit	Credit
Increase in Assets and Expenses Decrease in Liabilities and Revenues and Owner’s Equity	Decrease in Assets and Expenses Increase in Liabilities and Revenues and Owner’s Equity

EXAMPLE

Examples

1.       When you pay rent with cash: you increase rent (expense) by recording a debit transaction, and decrease cash (asset) by recording a credit transaction.

2.       When you receive cash for a sale: you increase cash (asset) by recording a debit transaction, and increase sales (revenue) by recording a credit transaction.

3.       When you buy Furniture on account from Mr. Qamar: You increase Furniture (asset) by recording a debit transaction, and Increase Mr. Qamar (liability) by recording a credit transaction.

4.       When you borrow with a cash loan: You increase cash (asset) by recording a debit transaction, and increase loan (liability) by recording a credit transaction.

5.       When you pay salary with cheque : you increase salary (expenses) by recording a debit transaction, and decrease Bank (asset) by recording a credit transaction.

Solution

Sr. #	Accounts Involve	Nature	Increase/Decrease	Dr./Cr.
1	Rent A/C	Expense	Increase	Dr.
	To Cash A/C	Asset	Decrease	Cr.
2	Cash A/C	Asset	Increase	Dr.
	To Sales A/C	Income/Revenue	Increase	Cr.
3	Furniture A/C	Asset	Increase	Dr.
	To Mr. Qamar A/C	Liability	Increase	Cr.
4	Cash A/C	Asset	Increase	Dr.
	To Loan A/C	Liability	Increase	Cr.
5	Salary A/C	Expense	Increase	Dr.
	To Bank A/C	Asset	Decrease	Cr.

Simple Thumb Rules to remember which accounts to credit and which to debit as per books

Personal accounts:

Debit	Credit
The Receiver	The Giver

Real/Asset Accounts:

Debit	Credit
What comes in	What goes out

Nominal/Expense Accounts:

Debit	Credit
All expenses / losses	All income / gains