Why Owner Equity or Equity or Capital is Credited

Owner’s Equity or Equity or Capital is credited as there are generally accepted rules set for this type of account. Based on these Rules of Debit And Credit, the usual, favorable, positive or normal balance of equity or capital is credit balance and negative, unusual and unfavorable balance is debit balance.

When the owners provide capital to the business or make investment in business through shares, the equity account in the business increases, so credit it and when Drawings Account is created or profits distributed to shareholders in the form of Dividends, then the value of equity or capital account decreases in the books of business.