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Accounting Basics: Debit & Credit

The document outlines 6 rules for debit and credit accounting entries. Rule 1 covers increasing an asset through increasing capital. Rule 2 involves increasing one asset by decreasing another. Rule 3 covers increasing an asset by increasing a liability. Rule 4 covers increasing an asset by increasing income. Rule 5 is about increasing an expense by decreasing an asset. Finally, Rule 6 addresses increasing a withdrawal by decreasing an asset. Each rule includes 1-2 examples to illustrate the debit and credit entries.

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313 views4 pages

Accounting Basics: Debit & Credit

The document outlines 6 rules for debit and credit accounting entries. Rule 1 covers increasing an asset through increasing capital. Rule 2 involves increasing one asset by decreasing another. Rule 3 covers increasing an asset by increasing a liability. Rule 4 covers increasing an asset by increasing income. Rule 5 is about increasing an expense by decreasing an asset. Finally, Rule 6 addresses increasing a withdrawal by decreasing an asset. Each rule includes 1-2 examples to illustrate the debit and credit entries.

Uploaded by

Glesa Saliente
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Rules of Debit and Credit

Rule 1: Increase in ASSET


Increase in CAPITAL
Debit Credit
Entry: ASSET xxxxx
CAPITAL xxxxx

Example 1: Owner invested his cash, P100,000 to start the business.


Cash 100,000
Owner, capital 100,000
Example 2: Mrs. Cruz used her cash, P500,000 as an investment to her business.
Cash 500,000
Mrs.Cruz, capital 500,000

Rule 2: Increase in ASSET


Decrease in another ASSET
Debit Credit
Entry: ASSET xxxxx
ASSET xxxxx
Example 1: Purchased equipment for P75,000 cash.
Equipment 75,000
Cash 75,000
Example 2: Bought supplies for P39,000.
Supplies 39,000
Cash 39,000
Rule 3: Increase in ASSET
Increase in LIABILITY
Debit Credit
Entry: ASSET xxxxx
LIABILITY xxxxx
Example 1: Purchased equipment for P75,000 on account.
Equipment 75,000
Accounts payable 75,000
Example 2: Bought supplies for P39,000 on credit
Supplies 39,000
Accounts payable 39,000
Example 3: Bought supplies for P39,000 on credit and issued a promisorry note
Supplies 39,000
Notes payable 39,000

Rule 4: Increase in ASSET


Increase in INCOME
Debit Credit
Entry: ASSET xxxxx
INCOME xxxxx
Example 1: Received P64,000 cash from giving services to a client.
Cash 64,000
Service income 64,000
Example 2: Collected P10,000 form selling fruits.
Cash 10,000
Sales 10,000
Rule 5: Increase in EXPENSE
Decrease in ASSET
Debit Credit
Entry: EXPENSE xxxxx
ASSET xxxxx
Example 1: Paid Taxes for the period, P89,000 cash.
Taxes 89,000
Cash 89,000
Example 2: Recorded the use of supplies for the period, P54,000.
Supplies expense 54,000
Supplies 54,000

Rule 6: Increase in WITHDRAWAL


Decrease in ASSET
Debit Credit
Entry: WITHDRAWAL xxxxx
ASSET xxxxx
Example 1: Owner withdrew her cash, P8,000 for personal uses.
Owner, drawings 8,000
Cash 8,000
Example 2: Mr. Reyes withdrew his cash, P12,000 for his personal uses.
Mr. Reyes, drawings 12,000
Cash 12,000

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