Accounts that are increased with debits
Updated: Oct 14
In accounting, understanding which accounts are increased with debits is essential for accurate financial reporting. Debits and credits are the backbone of the double-entry accounting system, where each transaction affects at least two accounts to keep the accounting equation balanced.
Accounts Increased with Debits
1. Assets: These include cash, inventory, accounts receivable, and equipment. When a business acquires more assets, the corresponding asset account increases with a debit entry. For example, purchasing office supplies for cash would debit the supplies account.
2. Expenses: Expenses represent the costs incurred by a business in its operations. Common expense accounts include rent, utilities, and salaries. These accounts are increased with debits when the business incurs expenses, reducing net income.
3. Losses: Losses, similar to expenses, reflect a decrease in net income. These accounts are also increased with debits. For instance, recording a loss from the sale of equipment would involve debiting the loss account.
Understanding these accounts is crucial for maintaining accurate financial records and ensuring the integrity of financial statements. By accurately applying debits, businesses can better track their financial health and make informed decisions.
A Simple Way to Remember
Think of the word DEALER. Dividends, Expenses, Assets, Losses, Equipment (an asset), and Receivables (an asset) all go up with a debit. Everything else goes up with a credit.
Three Quick Examples
You pay $500 for rent. Debit Rent Expense $500. Credit Cash $500.
You buy a $2,000 computer with cash. Debit Equipment $2,000. Credit Cash $2,000.
A customer owes you $1,200. Debit Accounts Receivable $1,200. Credit Revenue $1,200.
Common Mistake
Many people think debit means "money out" because that is how a bank statement looks. In your books, a debit only means the left side of the entry. Whether the account goes up or down depends on the type of account.
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