Analyzing Transaction into Debit and Credit Parts

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There are billions of dollars transactions in this world everyday. Billions of journal entries passed in this world for recording this. There are billions of account which is made in billions of ledger books. How can accountant analyze the transaction into debit and credit parts? It is important question.

Accountant uses only accounting equation for this.

1. Asset Balance Always Debit Side 

Left Side of accounting equation is asset side. So, if the balance of asset, it is in left side and left side is also debit side.

2. Liability Balance is Always Credit Side

Right side of accounting equation is liability side. If there is liability balance, it will be credit side because right side is credit side.

3. Increase in Asset is Debit Side

Because balance of left side of accounting equation will increase.

4. Decrease in Asset is Credit Side 

Yes, decrease in asset will decrease the balance of asset. Because balance of asset is in the left side of accounting equation, so, it will credit side of same account.

5. Increase in Liability is Credit Side 

Because balance of liability in right side or credit side of accounting equation. All increase in liability will also add same credit side of account

6. Decrease in Liability is Debit Side 

All decrease in liability will be debit side because balance and increase in liability in credit side of accounting equation. So, when we make the account of same liability, we will show debit side all the decrease in liability for counting balance of liability which will show credit balance of liability.


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Accounting Education: Analyzing Transaction into Debit and Credit Parts
Analyzing Transaction into Debit and Credit Parts
Accounting Education
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