Debits and credits made easy! I guarantee that you will understand the accounting term debits and credits once and for all after watching this video! Debits and credits are part of the #accountingbasics that you MUST understand.

⏱️TIMESTAMPS⏱️
0:00 Introduction
0:12 Debit on the left, credits on the right
0:45 Debit and credit for balance sheet accounts
1:12 Debit and credit for income statement accounts
1:32 Debit and credit journal entry examples
3:16 Debit and credit net income

A related video on debits and credits, using DC ADE LER to explain it, can be found at https://www.youtube.com/watch?v=b93KBmcXanI

How do debits and credits work? Does a debit increase an account, and does a credit decrease an account? Or is it the other way around? What are the rules of debit and credit? That really depends on the type of account we are looking at.

For balance sheet accounts, we essentially have three types of account. Assets accounts, where the natural state is for an asset account to have a debit balance. Liability accounts, where the natural state is for a liability account to have a credit balance. Equity accounts, where the natural state is for an equity account to have a credit balance. Assets increase with a debit. Liabilities and equity increase with a credit.

For income statement accounts, we have two types of account. Expense accounts, where the natural state is for an expense account to have a debit balance. Revenue accounts, where the natural state is for a revenue account to have a credit balance. Expenses increase with a debit. Revenues increase with a credit.

Philip de Vroe (The Finance Storyteller) aims to make strategy, finance and leadership enjoyable and easier to understand. Learn the business and #accounting vocabulary to join the conversation with your CEO at your company. Understand how financial statements work in order to make better stock market investment decisions. Philip delivers finance training in various formats: YouTube videos, classroom sessions, webinars, and business simulations. Connect with me through Linked In!