Debits Increase Assets And Decrease Liabilities While Credits Decrease Assets And Increase Liabilities

Debits Increase Assets And Decrease Liabilities

According to Rules of Debit And Credit, with every debit amount added to an asset account, it increases it as it is a normal, usual, positive or favorable balance for asset accounts while with every debit amount added to a liability account, it decreases it as it is unusual, unfavorable or negative for liability accounts.

Credits Decrease Assets And Increase Liabilities

Credit Decrease Assets and Increase Liabilities as negative, unusual or unfavorable balance for assets is credit and credit balance for liabilities is normal, usual, positive or favourable, so liabilities increase with a credit amount.

For example, a company purchased asset of Rs. 50000 on account increased the asset account as it is increasing, so we debit it and increased creditor / accounts payable as a liability account, so we credit such liability account.

Following journal entry is recorded as shown below:

                                                         Asset a/c  50000

                                                                              Accounts Payable a/c  50000

 

                                                         (Purchased Asset On Credit)