Why Are Increases / Decreases In Liabilities Recorded As Credits Or Debits

Why Decreases And Increases In Liabilities Recorded As Debits And Credits

According to the Rules of Debit And Credit, any increase in Liabilities are recorded on the credit side of the ledger account as the credit balance is a favorable or positive balance of liabilities account.

On the other hand, any decrease in liabilities account resulted in the debit to liabilities account as with the decrease in liabilities, these are decreased and unfavorable or negative balance is on the debit side in the ledger account due to make payments to suppliers and other reasons.

What is Negative Liability - Meaning

As negative liabilities have debit balance, so these are treated as Assets on Balance Sheet until these are cleared. Negative liability on balance sheet is created because of some reasons such as paying excessive amount to vendors / suppliers due to some errors or mistakes, etc.