Revenue accounts can be one of two types:Įxpense accounts are also listed on your income statement. When you debit a revenue account, the balance goes down, but when you credit a revenue account, the balance goes up. A revenue account mirrors liabilities and equity in one key way. Revenue accounts are listed on your income statement. When you debit your liabilities and equity accounts, the balances go down, but when you credit them, they go up. Just take the idea behind an asset account and reverse it.
Liabilities and equity accounts are also on your balance sheet. When you debit an asset account, the balance goes up, but when you credit an asset account, the balance goes down.
That's only true some of the time in accounting.ĭebits and credits break out into four pieces: assets, liabilities and equity, revenue, and expenses.Īsset accounts are on your balance sheet, and they’re pretty straightforward. Credits increase your account balance while debits reduce it. You record credits on the right side of your accounting ledger.ĭebits and credits are fickle little creatures. Untangling CreditsĪ credit increases a liability (e.g., loan) or equity account (e.g., capital) or decreases an asset or expense account. You record debits on the left side of your accounting ledger. In the accounting services world, a debit increases assets (e.g., cash) or expense accounts (e.g., utilities) or decreases liabilities or equity. Of course, it’s a little more complicated, and each has subtypes and nuances. Transactions are recorded into two accounts-debits and credits-to create a balanced financial picture. Every business transaction impacts your company’s financial statements at the monetary level.
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