![]() ![]() These accounts are used to reduce normal accounts. For instance, a contra asset account has a credit balance and a contra equity account has a debit balance. Well, what is an un-normal account? Contra accounts are accounts that have an opposite debit or credit balance. Notice I said that all “normal” accounts above behave that way. This means that equity accounts are increased by credits and decreased by debits. Equity AccountsĮquity accounts like retained earnings and common stock also have a credit balances. Liabilities are increased by credits and decreased by debits. In other words, these accounts have a positive balance on the right side of a T-Account. LiabilitiesĪll normal liabilities have a credit balance. Assets are increased by debits and decreased by credits. This means that asset accounts with a positive balance are always reported on the left side of a T-Account. AssetsĪll normal asset accounts have a debit balance. Here are the main three types of accounts. Each account is assigned either a debit balance or credit balance based on which side of the accounting equation it falls. There are several different types of accounts in an accounting system. Instead, they reflect account balances and their relationship in the accounting equation.ĭebit and Credit Accounts and Their Balances So debits and credits don’t actually mean plusses and minuses. Thus, debit entries are always recorded on the left and credit entries are always recorded on the right. ![]() ![]() If you will notice, debit accounts are always shown on the left side of the accounting equation while credit accounts are shown on the right side. ![]()
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