Editing Double-entry bookkeeping (section)

==Debits and credits==
{{main article|Debits and credits}}
{{unreferenced section|date=October 2014}}
Double-entry bookkeeping is governed by the [[accounting equation]]. If revenue equals expenses, the following (basic) equation must be true:

:''assets = liabilities + equity''

For the accounts to remain in balance, a change in one account must be matched with a change in another account. These changes are made by debits and credits to the accounts. Note that the usage of these terms in accounting is not identical to their everyday usage. Whether one uses a debit or credit to increase or decrease an account depends on the [[normal balance]] of the account. Assets, Expenses, and [[wikt:withdrawal|Drawings]] accounts (on the left side of the equation) have a normal balance of ''debit''. Liability, Revenue, and Capital accounts (on the right side of the equation) have a normal balance of ''credit''. On a [[general ledger]], debits are recorded on the left side and credits on the right side for each account. Since the accounts must always balance, for each transaction there will be a debit made to one or several accounts and a credit made to one or several accounts. The sum of all debits made in each day's transactions must equal the sum of all credits in those transactions. After a series of transactions, therefore, the sum of all the accounts with a debit balance will equal the sum of all the accounts with a credit balance.

Debits and credits are numbers recorded as follows:
* ''Debits'' are recorded on the left side of a ledger account, a.k.a. [[Debits and credits#T-accounts|T account]]. Debits increase balances in asset accounts and expense accounts and decrease balances in liability accounts, revenue accounts, and capital accounts.
* ''Credits'' are recorded on the right side of a T account in a ledger. Credits increase balances in liability accounts, revenue accounts, and capital accounts, and decrease balances in asset accounts and expense accounts.
* ''Debit accounts'' are asset and expense accounts that usually have debit balances, i.e. the total debits usually exceed the total credits in each debit account.
* ''Credit accounts'' are revenue (income, gains) accounts and liability accounts that usually have credit balances.

{| class="wikitable"
|-
! &nbsp; !! colspan=1 | Debit !! colspan=3 | Credit
|-
| Asset || align=center | Increase || align=center | Decrease
|-
| Liability || align=center | Decrease || align=center | Increase
|-
| Capital || align=center | Decrease || align=center | Increase
|-
| Revenue || align=center | Decrease || align=center | Increase
|-
| Expense|| align=center | Increase || align=center | Decrease
|}

The mnemonic '''DEADCLIC''' is used to help remember the effect of debit or credit transactions on the relevant accounts. '''DEAD''': '''D'''ebit to increase '''E'''xpense, '''A'''sset and '''D'''rawing accounts and '''CLIC''': '''C'''redit to increase '''L'''iability, '''I'''ncome and '''C'''apital accounts.

A second popular mnemonic is DEA-LER, where DEA represents Dividend, Expenses, Assets for Debit increases, and Liabilities, Equity, Revenue for Credit increases.

The account types are related as follows:<br />
current equity = sum of equity changes across time (increases on the left side are debits, and increases on the right side are credits, and vice versa for decreases)<br />
current equity = Assets – Liabilities<br />
sum of equity changes across time = owner's investment (Capital above) + Revenues – Expenses