Are Increases In Shareholders Equity Recorded As A Debit Or Credit

Increases / Decreases In Shareholders Equity Recorded As A Debit Or Credit

According to the Rules of Debit And Credit, an increase in Shareholders Equity, in case of Proprietorship and Partnership, the term "Capital" is used instead of shareholder equity / stockholder equity, is recorded on the credit side in the ledger account as increase in shareholders equity shows the favorable result of this particular type of account which also has credit balance which is a usual, normal, positive or favorable for it.

On the other hand, any decrease in shareholders equity account resulted in the debit side of a ledger account. It shows that equity account decreases due to the utilization of funds from the business or withdrawn of cash or goods from business for owners’own use. When the shareholders equity account has debit balance, then it is called negative, unusual or unfavorable balance.