🔹 Debit & Credit Rules for Basic Accounting Elements

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1. Assets (Things the business owns)

• Rule:

  • Debit what comes in

  • Credit what goes out

✅ Example:

• Business buys machinery for $10,000 (Cash paid).

  • Machinery A/c Dr. $10,000 (comes in)

  • Cash A/c Cr. $10,000 (goes out)

2. Liabilities (What the business owes)

• Rule:

  • Debit decrease in liability

  • Credit increase in liability

✅ Example:

• Business takes a loan of $5,000 from bank.

  • Bank Loan A/c Cr. $5,000 (liability increases)

  • Cash A/c Dr. $5,000 (asset increases)

3. Equity (Capital / Owner’s Equity)

• Rule:

  • Debit decrease in capital

  • Credit increase in capital

✅ Example:

• Owner invests $20,000 cash in business.

  • Cash A/c Dr. $20,000 (asset increases)

  • Capital A/c Cr. $20,000 (owner’s equity increases)

4. Revenue / Income

• Rule:

  • Debit decrease in income

  • Credit increase in income

✅ Example:

• Business earns $2,000 service income (on cash).

  • Cash A/c Dr. $2,000 (asset increases)

  • Service Revenue A/c Cr. $2,000 (income increases)

5. Expenses / Losses

• Rule:

  • Debit all expenses & losses

  • Credit all incomes & gains

✅ Example:

• Paid $1,000 as office rent.

  • Rent Expense A/c Dr. $1,000 (expense increases)

  • Cash A/c Cr. $1,000 (asset decreases)

🔹 Quick Memory Table

✅ In short:

• Debit = Assets ↑, Expenses ↑

• Credit = Liabilities ↑, Capital ↑, Income ↑

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