![]() If for every transaction debits equal credits, then the accounting equation will always balance. Debits and credits allow us to take a shortcut to ensure that the accounting equation always balances. ![]() If you fully grasp the meaning of these two equalities, you are well on your way to mastering the mechanics of accounting or learning the language of accounting. In addition to assets equaling liabilities and owner's equity, debits should always equal credits. As a result, liabilities and owner's equity accounts will typically have credit balances. They are decreased by debits and increased by credits. Now, the opposite relationship is true for liability and owner's equity accounts. That is, their balance will typically be on the left side of the T account. Asset accounts will usually have debit balances. Since we expect the total increases in cash to be greater than the decreases, the cash account will usually have a debit balance after accounting for all transactions. To decrease the cash account, we credit it. For example, to increase the cash account, we debit it. By convention, for asset accounts, debits refer to increases. Now, in addition to representing the left and right side of an account, the terms debit and credit take on additional meaning when coupled with specific accounts. Instead of using the terms left and right to indicate which side of a T account is affected, terms unique to accounting were developed: debit, abbreviated DR, is used to indicate the left side of the T account, and credit, abbreviated CR, is used to indicate the right side of a T account.
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