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

• How Transactions Affect the Balance Sheet

  • Recording of a debit amount to one account and an equal credit amount to another account results in total debits being equal to total credits for all accounts in the general ledger.
  • Assets Accounts: debit increases in assets and credit decreases in assets.
  • Capital Accounts: credit increases in capital and debit decreases in capital.
  • Liabilities Accounts: credit increases in liabilities and debit decreases in liabilities.
  • A debit to asset accounts will result in a decrease in the balance sheet accounts.

• Double-Entry Bookkeeping

  • Recording of a debit amount to one account and an equal credit amount to another account results in total debits being equal to total credits for all accounts in the general ledger.
  • Real account: Debit what comes in and credit what goes out
  • Nominal account: Debit all expenses & losses and credit all incomes & gains
  • The rules of debit and credit depend on the nature of an account.
  • Assets accounts: Debit increases in assets and credit decreases in assets

• 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.

• A short history of accounting and double entry bookkeeping

  • It does this by first identifying values as either a Debit or a Credit value.
  • A Debit value will always be recorded on the debit side (left hand side) of a nominal ledger account and the credit value will be recorded on the credit side (right hand side) of a nominal ledger account.
  • A nominal ledger has both a Debit (left) side and a Credit (right) side.
  • If the values on the debit side are greater than the value of the credit side of the nominal ledger then that nominal ledger is said to have a debit balance.Each transaction must be recorded on the Debit side of one nominal ledger and that same transaction and value is also recorded on the Credit side of another nominal ledger hence the expression Double-Entry (entered in two locations) one debit and one credit (Wikipedia 2009d).
  • Secondly, note that a debit to an asset account increases the value of the account and a debit to a liability (or owner's equity) account decreases its value.

• 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.

• Treasury Stock

  • Using the cost method, a treasury stock account is increased (debited) in the equity section of the balance sheet for the stock purchase price and cash is reduced (credited).
  • When the treasury stock is sold back on the open market, the treasury stock account is reduced (credited) for the original cost and the difference between original cost and sales price is debited or credited to a treasury stock paid in capital account, which is also disclosed in the equity section of the balance sheet.
  • Cash is debited for the proceeds of the sale.
  • On the purchase date, treasury stock is increased (debited) for the par value of stock reacquired and paid in capital is reduced (debited) or increased (credited) by the amount of the purchase price in excess of par.
  • Differences between the sales price and repurchase price are debited or credited to paid in capital, along with a debit to cash for proceeds from the sale.

• 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.