复式记账法 a double-entry accounting system

Debits and Credits are simply accounting jargon that can be traced back hundreds of years and that is still used in today’s double-entry accounting system. A double-entry accounting system means that every transaction that a company makes is recorded in at least two accounts, where one account gets a “debit” entry while another account gets a “credit” entry.

T Accounts Explained

The left side of the Account is always the debit side and the right side is always the credit side no matter what the account is.

For different accounts, debits and credits can mean either an increase or a decrease, but in a T Account, the debit is always on the left side and credit on the right side, by convention.

Let’s take a more in-depth look at the T accounts for different accounts namely, assets, liabilities, and shareholder’s equity, the major components of the balance sheet, or statement of financial position.

T Accounts for the Income Statement

T Accounts are also used for income statement accounts as well, which include revenues, expenses, gains, and losses.

Once again, debits to revenue/gain decrease the account while credits increase the account. The contrary is true for expenses and losses. Putting all the accounts together, we can examine the following.