20 examples of Debits and Credits

Debits and Credits can be hard to grasp when introducing double-entry accounting. Luckily, all you need to memorize is

Assets

⬆️ go UP with DEBITS

⬇️ Go DOWN with CREDITS

Liabilities + Owners Equity

⬆️ Go UP with CREDITS

⬇️ Go DOWN with

Debits & Credits are actually really simple if you understand this formula.

Here are 20 examples of Debits and Credits:

1. Record revenue (cash basis) → DR Cash, CR Revenue

2. Collect cash from receivables → DR Cash, CR Accounts Receivable

3. Take out a loan → DR Cash, CR Loan Payable

4. Earn revenue from deferred → DR Deferred Revenue, CR Revenue

5. Record legal fees net 30 → DR Legal Expenses, CR Accounts Payable

6. Pay legal fees from net 30 → DR Accounts Payable, CR Cash

7. Accrue consulting fees → DR Consulting Fees Expense, CR Accrued Liabilities

8. Record prepaid software → DR Prepaid Expenses, CR Cash

9. Amortize prepaid software → DR Software expense, CR Prepaid Expenses

10. Purchase fixed assets → DR Fixed Assets, CR Cash

11. Depreciate fixed assets → DR Depreciation Expense, CR Accumulated Depreciation

12. Record discounts → DR Discounts, CR Cash

13. Purchase raw materials → DR Raw Materials, CR Accounts Payable

14. Convert raw materials to finished goods → DR Finished Goods Inventory, CR Raw Materials Inventory

15. Convert finished goods to COGS → DR Cost of Goods Sold, CR Finished Goods Inventory

16. Transfer money to fully owned subsidiary → DR Due to/from Subsidiary, CR Cash

17. Record legal fees from equity raise → DR Equity Issuance Fees, CR Cash

18. Convert convertible notes to Preferred equity → DR Convertible Notes, CR Preferred Stock

19. Set allowance for returns → DR Allowance for Returns, CR Sales Returns

20. Write off non-collectible funds → DR Bad Debt Expense, CR Accounts Receivable

Those are my 20 examples - what would you add?

If you liked this post, you'll also like my course Accounting Made Easy.