To choose the debit and credit for a transaction, first name the two accounts affected, then decide each account’s type. Assets and expenses increase with a debit. Liabilities, capital and income increase with a credit. A decrease uses the opposite side.
This skill appears in almost every Accounting question, from a single journal entry to a full set of ledgers. It is the core of double-entry foundations.
How do you pick the sides step by step?
- Find the two accounts. Ask what has changed in the business, for example cash, equipment, a loan or rent.
- Name each account’s type: asset, liability, capital, income or expense.
- Decide whether each account increases or decreases.
- Apply the rule. An increase in an asset or expense is a debit. An increase in a liability, capital or income is a credit. A decrease is the reverse.
- Check: one debit, one credit, same amount.
| Type | Increase | Decrease |
|---|---|---|
| Asset | Debit | Credit |
| Expense | Debit | Credit |
| Liability | Credit | Debit |
| Capital | Credit | Debit |
| Income | Credit | Debit |
Worked example
Nadi Stationery is a fictional shop. Record these four transactions in January.
- The owner pays RM10,000 into the business bank account.
- The shop buys display shelves for RM2,400, paying by bank.
- The shop pays RM600 rent in cash.
- The shop takes a loan of RM5,000, paid into the bank account.
Transaction 1. Accounts: Bank (asset, up) and Capital (up). Debit Bank RM10,000; credit Capital RM10,000.
Transaction 2. Accounts: Shelves (asset, up) and Bank (asset, down). Debit Shelves RM2,400; credit Bank RM2,400.
Transaction 3. Accounts: Rent (expense, up) and Cash (asset, down). Debit Rent RM600; credit Cash RM600.
Transaction 4. Accounts: Bank (asset, up) and Loan (liability, up). Debit Bank RM5,000; credit Loan RM5,000.
Total debits are 10,000 + 2,400 + 600 + 5,000 = RM18,000. Total credits are 10,000 + 2,400 + 600 + 5,000 = RM18,000. They agree.
What mistake should you watch for?
A common slip is to treat debit as “money out” and credit as “money in”.
Mistaken entry: The shop receives RM300 commission in cash. The student writes: debit Commission income RM300, credit Cash RM300.
The student reasoned that income “comes in”, so it was put on the side that felt like receiving.
The entry balances, but both accounts are on the wrong side. Cash is an asset that increases, so it is debited. Commission income is income that increases, so it is credited. Correct entry: debit Cash RM300; credit Commission income RM300.
Fix the habit by naming the account type before you write any side.
Check yourself
1. The owner takes RM500 cash from the till for personal use. Give the debit and credit.
Show answer
Drawings increase (they reduce capital) and Cash, an asset, decreases. Debit Drawings RM500; credit Cash RM500.
2. The shop buys goods for resale worth RM800 on credit from a supplier. Give the debit and credit.
Show answer
Purchases is an expense-type account that increases: debit. The supplier is a liability that increases: credit. Debit Purchases RM800; credit the supplier’s account (a trade payable) RM800.
3. The shop later pays that supplier RM800 by bank. Give the debit and credit.
Show answer
The liability decreases: debit. Bank, an asset, decreases: credit. Debit the supplier’s account RM800; credit Bank RM800.
Where does this lead next?
Next, see how the same rules apply when a sale is made for cash or on credit in record a cash and credit sale distinctly. The double-entry and ledger trainer can check your choices on fictional transactions.
Some students memorise the table but lose marks when the wording changes. A teacher in online one-to-one Accounting tuition can give you unfamiliar transactions until the reasoning, not the memory, carries you.