Trick to Remember Credit & Debit
3
Note: OK, properly speaking, I’m a beginner in accounting discipline. And it’s still very hard for me to understand this “Credit and Debit” thing. All of your corrections are more than welcome. Income Statement Net Income = Revenues/Gross Profit - Expenses CREDIT DEBIT Explanation: Exception: Mostly record Operating Expenses: There is no account under Net Income. Cost of Goods sold is considered as expense. 2 things to remember: Net Income is a result of deduction of It is reported under Revenues (being 1. Depreciation expenses are here Expenses from Revenues. subtracted) to be able to determine 2. But Accumulated Depreciation are Warning: Gross Profit. On the contrary, some people not here. They are under BS. It is also recorded in Trial Balance with a trick. report it under the Expenses. Accounts which are in are credited when increases. (opposite is true, debited when decreases) Accounts which are in are debited when increases. (opposite is true, credited when decreases) Accounts which are in are the result accounts without any need to be credited or be debited. Exception: In the TRIAL BALANCE, the Net Income or Net Loss sometimes (“sometimes” here means some systems require it, some others do not) shows its opposite nature under the Income Statement Column and shows its true nature under the Statement of Return Earnings Column.
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I'm new to accounting discipline. Your correction is welcome if you find something wrong about my trick to remember the famous Credit & Debit rule.
Transcript of Trick to Remember Credit & Debit
Note: OK, properly speaking, I’m a beginner in accounting discipline. And it’s still very hard for me to understand this “Credit and Debit” thing. All of your corrections are more than welcome.
Income Statement
Net Income
=
Revenues/Gross Profit
-
Expenses
CREDIT DEBIT Explanation: Exception: Mostly record Operating Expenses:
There is no account under Net Income. Cost of Goods sold is considered as expense. 2 things to remember:
Net Income is a result of deduction of It is reported under Revenues (being 1. Depreciation expenses are here
Expenses from Revenues. subtracted) to be able to determine 2. But Accumulated Depreciation are
Warning: Gross Profit. On the contrary, some people not here. They are under BS.
It is also recorded in Trial Balance with a trick. report it under the Expenses.
Accounts which are in are credited when increases. (opposite is true, debited when decreases)
Accounts which are in are debited when increases. (opposite is true, credited when decreases)
Accounts which are in are the result accounts without any need to be credited or be debited.
Exception: In the TRIAL BALANCE, the Net Income or Net Loss sometimes (“sometimes” here means some systems require it, some others do not) shows its opposite nature under the Income Statement Column and shows its true nature under the Statement of Return Earnings Column.
Statement of Retained Earning
End. Retained E.
=
Beg. Retained E.
+
Net Income
-
Dividends
CREDIT DEBIT Its result also appears on the The number is reported from last The amount is reported from the It is not shown in the Balance
Balance sheet. Year. Income Statement. Sheet, even if it is also under
Warning: Warning: Tips: the categories of Owner’s Equity
In some company, they call it In Trial Balance, it normally In French Plan Comptable Général,
Capital Stock, calculation is tricky. Carries a CREDIT balance there is 1 Compte de Résultat.
Accounts which are in are credited when increases. (opposite is true, debited when decreases)
Accounts which are in are debited when increases. (opposite is true, credited when decreases)
Accounts which are in are the result accounts without any need to be credited or be debited.
Exception:
• There is one more trick about the Ending Retained Earning (Let’s call it “ERE”) and the Beginning Retained Earning (Let’s call it “BRE”). The ERE of the current year will become the BRE next year. The ERE next year will become the BRE of the year following that next year. So at first, each ERE is just a result account ( ). But next, it will carry a credit balance ( ) because it already changes into BRE.
In the TRIAL BALANCE, the Net Income or Net Loss sometimes (“sometimes” here means some systems require it, some others do not) shows its opposite nature under the Income Statement Column and shows its true nature under the Statement of Return Earnings Column.
Balance Sheet
ASSETS
=
LIABILITIES
+
OWNER’S EQUITY
DEBIT CREDIT CREDIT Tangible Assets Current Liabilities Capital
- Current Assets
- Non-current Assets
Non-current Liabilities Retained Earning
Intangible Assets
Accounts which are in are credited when increases. (opposite is true, debited when decreases)
Accounts which are in are debited when increases. (opposite is true, credited when decreases)
