Debits & credits — Excel guide
Double-entry's engine room: every transaction debits one account and credits another, and the books stay in balance because the two sides always match.
The rules of debit and credit
Debits and credits aren't good or bad — they're directions. Each account type has a normal balance side; entries on that side increase it.
| Account type | Increases with | Normal balance |
|---|---|---|
| Assets | Debit | Debit |
| Expenses | Debit | Debit |
| Dividends/Draws | Debit | Debit |
| Liabilities | Credit | Credit |
| Equity | Credit | Credit |
| Revenue | Credit | Credit |
Journal → ledger → trial balance
Transactions are recorded chronologically in the JOURNAL, posted by account into the LEDGER, and summed into the TRIAL BALANCE to prove debits = credits. Off by a number divisible by 9? Suspect a transposition (270 = 720 − 450-style flip).
A credit sale, both sides
Sell $1,000 on account: debit Accounts Receivable 1,000 (asset up), credit Revenue 1,000 (revenue up). When cash arrives: debit Cash, credit A/R — revenue is NOT touched twice.
Closing entries
At period end, temporary accounts (revenues, expenses, dividends) are zeroed into Income Summary, whose net lands in Retained Earnings. Permanent accounts (assets, liabilities, equity) carry forward untouched.