- 1). Debit assets when you make purchases. For example, if you buy a new computer for your business, you must debit your assets to reflect the increase in assets. To balance the accounting equation, an account is also credited. If you paid cash, then cash is credited. If you financed the computer, accounts payable is credited.
- 2). Credit revenue accounts to record sales. When you make a sale, the revenue is entered into the accounting system with a credit. If the business made $1,000 in sales, the Revenue account is credited. If it was a cash sale, the Cash account is debited. If you extended credit for the sale, the Revenue account is credited, and the accounts receivable account is debited.
- 3). Credit or debit accounts as you make payments or create new debt. In the example, if you financed the computer that you purchased, the asset account is debited, and the accounts payable account is credited. If you make a payment on the account, the accounts payable account is debited to reflect the decrease in the account. The matching account, Cash, is credited.
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