11/02/2025
This table is a cheat sheet that summarizes the normal balances of different types of accounts in accounting.
👉 In double-entry accounting, every account has a normal balance, which means the side (Debit or Credit) where increases are recorded.
🔑 Breakdown:
Assets → Debit
Assets (cash, inventory, buildings, etc.) increase with a debit.
Example: Buying equipment increases assets → Debit Equipment.
Contra Asset → Credit
A contra asset reduces assets, so its balance is the opposite.
Example: Accumulated Depreciation has a normal balance on the credit side.
Liabilities → Credit
Liabilities (loans, accounts payable, etc.) increase with a credit.
Example: Taking a loan increases liabilities → Credit Loan Payable.
Contra Liability → Debit
A contra liability reduces liabilities, so its balance is the opposite.
Example: Bond Discount (reduces bonds payable) → Debit.
Owner’s Equity → Credit
Equity represents owner’s claim on the business; it increases with credit.
Example: Owner invests cash → Credit Capital.
Stockholders’ Equity → Credit
For corporations, stockholders’ equity (common stock, retained earnings) increases with a credit.
Owner’s Drawing or Dividends → Debit
Withdrawals/dividends reduce equity, so they have a debit balance.
Example: Owner withdraws money → Debit Drawing.
Revenues (Income) → Credit
Income increases equity, so revenues have a credit balance.
Example: Sales revenue → Credit Sales.
Expenses → Debit
Expenses decrease equity, so they increase with debit.
Example: Rent paid → Debit Rent Expense.
Gains → Credit
Like revenues, gains increase equity → Credit.
Losses → Debit
Like expenses, losses decrease equity → Debit.
📌 Simple Memory Tip (DEAD CLIC)
Debit: Expenses, Assets, Drawings (DEAD)
Credit: Liabilities, Income, Capital (CLIC)
This table is basically showing that principle.
