debit

Examples of debit in the following topics:

• Debits and Credits

  • Everything on the left side (debit side) increases with a debit and has a normal debit balance; everything on the right side (credit side) increases with a credit and has a normal credit balance.
  • Expenses reduce revenue, therefore they are just the opposite, increased with a debit, and have a normal debit balance.
  • What is debited and credited is also a matter of transaction type.
  • Real account: Debit what comes in and credit what goes out
  • Define how the terms debit and credit are used in accounting

• Bonds Issued at Par Value

  • To record a bond issued at par value, credit the "bond payable" liability account for the total face value of the bonds and debit cash for the same amount.
  • To balance this entry, the company must also debit cash equal to the face value of all the bonds issued.
  • To balance the entry, the company must record a debit equal to the amount it paid in its bond interest expense account.
  • Bond Interest Expense - debit interest payment (increase interest expense line)
  • This is done by debiting the bond payable account and crediting the cash account for the full book value of the bond.

• The Trial Balance

  • A trial balance is run during the accounting cycle to test whether the debits equal the credits.
  • The trial balance tests the equality of a company's debits and credits.
  • It lists all of the ledger, both general journal and special, accounts and their debit or credit balances to determine that debits equal credits in the recording process .
  • A trial balance only checks the sum of debits against the sum of credits.
  • If debits do not equal credits then the accountant or bookkeeper must determine why.

• Write-Offs

  • It debits the Allowance for Doubtful Accounts.
  • Notice that the debit in the entry to write off an account receivable does not involve recording an expense.
  • You might wonder how the allowance account can develop a debit balance before adjustment.
  • If the company wrote off any uncollectible accounts during 2009, it would debit Allowance for Uncollectible Accounts and cause a debit balance in that account.
  • If so, the allowance account would again develop a debit balance before the end-of-year 2010 adjustment.

• Fundamental Accounting Equation

  • A double-entry bookkeeping system involves two different "columns;" debits on the left, credits on the right.
  • Every transaction and all financial reports must have the total debits equal to the total credits.
  • A mark in the debit column will increase a company's asset and expense accounts, but decrease its liability, income and capital account.
  • As you can see, the total amount of the debits (the amount on the left) equal the credits (the total amount on the right).

• Issuing Bonds

  • On issuance, the journal entry to record the bond is a debit to cash and a credit to bonds payable.
  • On issuance, the journal entry to record the bond is a debit to cash and a credit to bonds payable.
  • The journal entry to record that is a debit interest expense and a credit to cash.

• Accounting for Sale of Stock

• Accounting for Interest Earned and Principal at Maturity

  • At maturity, firms should debit cash and credit held to maturity investments the balance of the principal payment.
  • Remember the original entry debited the held to maturity investment account and credit cash.

• Reporting Fair Value

  • ABC records a journal entry for the purchase by debiting Investment in XYZ Corp. for USD 50,000 and crediting Cash for USD 50,000.
  • ABC records a journal entry debiting Dividends Receivable for USD 50,000 and crediting Dividend Income for USD 50,000.
  • ABC records a journal entry for the purchase by debiting Investment in XYZ Corp. for USD 50,000 and crediting Cash for USD 50,000.
  • ABC records a journal entry debiting Dividends Receivable for USD 50,000 and crediting Dividend Income for USD 50,000.
  • If the investment is an "available for sale" security, the balancing debit or credit goes to an unrealized loss or gain account reported in the other comprehensive income section of owner's equity on the balance sheet.

• Recording Transactions

  • The accounting requirement that each transaction be recorded by an entry that has equal debits and credits is called double-entry procedure.
  • For each business transaction recorded, the total dollar amount of debits must equal the total dollar amount of credits.
  • If one account (or accounts) is debited for $100, then another account (or accounts) must be credited for the same amount.
  • For example, assets and expenses normally have debit balances, and liabilities and revenues normally have credit balances.
  • T-accounts are so named because of their "T" shape, with the name of the account on top, and debits and credits on the left and right, respectively.