Can you tell me why these T accounts: Cash Accounts and Accounts Receivable Accounts are considered a Debit and not a Credit in accounting?
T accounts: Cash %26amp; Accounts Receivable?bank rate
A debit in accounting is any increase in assets or decrease in liabilities or owner%26#039;s equity. A credit in accounting is any decrease in assets or increase in liabilities or owner%26#039;s equity.
T accounts: Cash %26amp; Accounts Receivable? loan
Look at it this way. Think of those accounts through the eyes of a bank. The bank owes its customers cash so they are in-debt to the customer. You are just used to seeing these accounts through your eyes. When the bank owes you money you see it as a credit. They credit your account but they DEBIT theirs. You always have to see it through the banks eyes or the business eyes, not the customer or consumer.|||because they are both asset accounts... and asset accounts%26#039; normal account is usually what they increase w/ and they increase w/ debit and decrease w/ credit.
these are like sort of rules in accounting and it would help u A LOT to memorize them... its the best way. trust me I learned the hard way.
Assets, expenses, and dividends increase w/ debit and decrease w/ credit.
Liabiliteis, OE, and revenue increase w/ credit and decrease w/ debit (Decrease w/ Debit... remember the 2 D%26#039;s)
SO the normal account is what they increase w/ ....
HTH|||1) Accounts have a numbering system where the first number of the account defines what type of account it is. A cash account could be 11, or 101 or 1001 etc. The 1 in front defines the account to be an asset. An account payable might be 21, 210, or 2001 etc. The 2 in front would would define the account to be a liability. Other assets or liabilities would follow in sequence. 3%26#039;s are capital accounts, 4%26#039;s are revenue accounts and 5%26#039;s are expenses. Higher levels of accounting have additional numbers because of additional classification%26#039;s of accounts. Don%26#039;t worry about that now.
2) Assets carry a NORMAL debit balance. (1)
LIabilities carry a NORMAL credit balance. (2)
Capital carries a NORMAL credit balance. (3)
Revenues carry a NORMAL credit balance. (4)
Expenses carry a NORMAL debit balance. (5)
3) If you memorize the order of the accounts, it%26#039;s fairly easy to associate the normal balance. The 1 and 5 accounts carry normal debit balances, while the three accounts in between, (3, 4, 5) carry normal credit balances.
4) Now, remember, I called these normal balances. There are exceptions to the rule. The exceptions are called CONTRA accounts.
Example: If the capital account was 31, then the drawing account would be 32. The capital account would have a credit balance but the drawing account would maintain a debit balance. That makes sense. Your total worth (capital) is going to be less the amount you spend for personal use. The drawing is a CONTRA CAPITAL account.
Another example: If the equipment account was 16, we would have an account that follows it called accumulated depreciation of equipment. This would be account number 17. The Equipment would carry a dr balance and the accumulated depreciation would carry a cr balance which would ba a CONTRA ASSET account. The difference between these two amounts is the book value of the asset.
5) addition in algebra - and a - you add and get a larger -
+ and a + you add and get a larger +
- and a + you subtract and take the sign of the larger
accounting works the same way:
dr and a dr = add and get a larger dr
cr and a cr = add and get a larger cr
dr and a cr = subtract. And of course the balance will be which ever was larger to start.
You will always dr your cash account when adding to your cash and always cr cash when taking away.
6) Your check book seems to contradict this, but it really doesn%26#039;t. Your check book is according to the banks records. Your deposit at the bank shows as a credit in your check book because, to them it%26#039;s a liability and they owe it to you upon demand. If you write a check and deduct it from your balance, it will be a debit. So your balance will always show as a credit in your check book. But in YOUR accounting records it will be a debit.
I hope this helps|||u need to maintain ur debit %26amp; credit equality through this formula;
A W E = L C R
(A �?Assets, W �?Owner’s withdrawal, E �?Expenses, all carry debit balances [i.e. debit increase %26amp; credit decreases the Account])
(L �?Liabilities , C �?Owner’s Capital/Equity, R �?Revenue, all carry credit balances [i.e. debit decreases %26amp; credit increases the Account])
Now consider following examples;
u make a selling on account, so ur journal entry will be,
Debit Accounts Receivable
Credit Sales
(Accounts Receivable is a debit %26amp; he/she is the debtor. Overall it is an Asset, it will carry a debit balance)
u mak a selling on Cash, so ur journal entry will be,
Debit Cash
Credit Sales
(Cash Account is a debit %26amp; it is an Asset, it will carry a debit balance).
Here, Sales is a credit (in both examples) %26amp; it is an Revenue, so it will carry Credit balance
Now ur above formula will be,
Accounts Receivable + Cash = Sales + Sales
Debit = Credit
Hope this helps.
