bonds or stocks, securities available for sale (debt security), mutual funds or retirement plans/pensions, owned real state, etc. Equity Account:This is the total value of a company’s operational assets after the clearance of all the liabilities.(4) Apply the debit and credit rules based on the type of. (3) Determine if the transaction increases or decreases the accounts balance. (2) Determine the accounts normal balance. invoices for vendors, bills, tax, bank fees, other payables, etc. How To Use and Apply The Debit and Credit Rules: (1) Determine the types of accounts the transactions affect-asset, liability, revenue, expense or draw account. Liability Account:These are the dues that a company is required to pay back, in other words, the financial obligations that are pending on an organization.E.g., interest or investment income, sales and/or service revenue, etc. I also explain assets, liabilities and equity accounts and how debits and credits increase/decrease in. This may also include interest from other investments. In this video, I explain the difference between debits and credits using t-accounts. Revenue Accounts: Keeps track of the income earned from the sales, i.e., products and/or services.E.g., utilities, salaries, rent, travel expenses, etc. Debits are always on the left side of the journal entry, and credits on the right. A debit entry increases an asset or expense account, or decreases a liability or owner’s equity. Expense Accounts:Keeps track of the charges that are used in the company’s day-to-day operations. Debit is cash that flows in the business, credit is cash that flows out. E.g., inventory, cash, vehicles, equipment and/or property, receivable accounts, etc.
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