Question

Briefly explain the rules of debits and credits as they relate to assets, liabilities, equity, revenue, and expenses. Do debits always increase an account? Do credits always decrease an account? Give examples.

Answer 1

To memorise this just remember AID (Asset Increase Debit, rest all work in the opposite direction)

Particulars	Increase	Decrease
Asset	DEBIT	CREDIT
Liabilities	CREDIT	DEBIT
Equity	CREDIT	DEBIT
Revenue	CREDIT	DEBIT
Expenses	DEBIT	CREDIT

1. Amount invested in business
	Debit	Credit
Cash	ASSET INCREASE
Capital		EQUITY INCREASE
2. Paid Accounts Payable
	Debit	Credit
Accounts Payable	LIAB DECREASE
Cash		ASSET DECREASE
3. Sold goods on account
	Debit	Credit
Accounts Receivable	ASSET INCREASE
Revenue		REVENUE INCREASE
4. Expenses paid
	Debit	Credit
Expenses	EXPENSE DEBIT
Cash		ASSET DECREASE