Topics, 200 Accounting Resources, 200 Lecture List
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Debits & Credits are the building blocks of financial accounting and are one way to express the double entry accounting system. We will discuss why we need debits and credits as a component of the double entry accounting system when we can u understand and work transactions using accounting equation, the main reason being that building financial transactions into financial statements with the accounting equation is not efficient. Debits and credits are a much better tool. It takes time to learn debits and credits in a similar way that it takes time to use a power tool but an electric screwdriver is much more efficient than a hand held. Leaning debits in credits takes memorization in a similar way to learning where pieces line up on the board. Memorizing rules like debits and credits is not fun but necessary to get to more interesting things. The first step is learning what the normal balance is for account types, meaning is the normal balance a debit or credit for assets, liability, and equity type accounts. Then we need to know what accounts fall under these account types. For example, cash is an asset, assets have a normal debit balance and therefore cash has a normal credit balance. After we know the normal debit and credit balance of the accounts we need to learn how to make them go up and down. If we want an account to go up, we need to do the same thing as what it is. For example, cash has a normal debit balance and if we want it to go up we need to do the same thing as what it is: debit.