Debit (DR)

Debit Accounting Asset Expense Liability Equity Financial Statements Bookkeeping
In accounting, a debit (DR) refers to any entry recording an addition to an asset or expense account, or a reduction from a liability or equity account.
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What is Debit (DR)?

In accounting, a debit (abbreviated as DR) is an entry that results in either an increase in assets or expenses or a decrease in liabilities, equity, or revenue on a company’s balance sheet. Debits are positioned on the left side of a ledger and are used to record transactions in the double-entry accounting system.

Examples

  1. Asset Purchase: When a company purchases office supplies for $500, it will debit the Office Supplies account (an asset) for $500.
  2. Expense Recognition: If a company incurs a $200 utility expense, it will debit the Utilities Expense account for $200.
  3. Loan Repayment: If a company pays off a $1,000 loan, it will debit the Loan Payable account (a liability) by $1,000.

Frequently Asked Questions

1. What does it mean to debit an account? Debiting an account means making an entry to the left-hand side of an account ledger, increasing asset and expense accounts or decreasing liability, equity, and revenue accounts.

2. Are debits always increases? No, debits increase asset and expense accounts but decrease liability, equity, and revenue accounts.

3. How do debits interact with credits? In double-entry accounting, every debit must be matched by an equivalent credit to maintain balanced financial statements.

4. What should be debited in a service purchase? When purchasing services, debit the Service Expense account for the cost of the service.

5. Can debits affect multiple accounts? Yes, a single transaction can require debiting multiple accounts, such as when buying assets involving multiple categories.

  • Credit (CR): An accounting entry on the right side of a ledger that increases liabilities, equity, or revenue, or decreases assets and expenses.
  • Double-Entry Accounting: An accounting system where each transaction affects at least two accounts, ensuring that total debits equal total credits.
  • Ledger: A record that contains all the financial accounts of a business, divided into debits and credits.

Online References

Suggested Books for Further Studies

  • “Accounting Made Simple: Accounting Explained in 100 Pages or Less” by Mike Piper
  • “Financial Accounting” by Jerry J. Weygandt, Paul D. Kimmel, and Donald E. Kieso
  • “Principles of Accounting” by Belverd E. Needles and Marian Powers

Fundamentals of Debit (DR): Accounting Basics Quiz

### What side of a ledger does a debit appear on? - [ ] Right - [x] Left - [ ] Top - [ ] Bottom > **Explanation:** In accounting, debits appear on the left-hand side of the ledger. This is a fundamental aspect of the double-entry bookkeeping system. ### Which type of account does a debit increase? - [ ] Liability - [ ] Equity - [ ] Revenue - [x] Assets > **Explanation:** A debit increases asset accounts. Expense accounts are also increased by debits. ### What type of account does a debit decrease? - [ ] Assets - [ ] Expenses - [x] Liabilities - [ ] Cost of Goods Sold (COGS) > **Explanation:** Debits decrease liability accounts. They also decrease equity and revenue accounts. ### When a company purchases office supplies on account, what is debited? - [x] Office Supplies - [ ] Accounts Payable - [ ] Sales Revenue - [ ] Cash > **Explanation:** The Office Supplies (asset account) is debited since the company is gaining office supplies. Accounts Payable (liability account) would be credited. ### In a double-entry system, how many sides must each transaction affect? - [ ] One - [x] Two - [ ] Three - [ ] Four > **Explanation:** Each transaction in a double-entry accounting system must affect at least two sides to ensure the accounting equation remains balanced. ### If a utility bill is paid, which account is debited? - [ ] Accounts Receivable - [ ] Sales Revenue - [x] Utilities Expense - [ ] Inventory > **Explanation:** The Utilities Expense account is debited to record the expense incurred. ### Which is indicated by a debit entry related to a bank loan? - [x] Decrease in liability (loan repayment) - [ ] Increase in equity - [ ] Increase in revenue - [ ] Decrease in expense > **Explanation:** A debit entry related to a bank loan typically indicates a reduction in liability due to repayment. ### What does a debit always require? - [ ] A corresponding debit entry - [ ] Cash transaction - [ ] Inventory count - [x] A corresponding credit entry > **Explanation:** Since it is a double-entry system, a debit always requires a corresponding credit entry. ### Which financial statement is impacted by debits to the expense accounts? - [x] Income Statement - [ ] Balance Sheet - [ ] Statement of Cash Flows - [ ] Statement of Equity > **Explanation:** Expense accounts are reported on the Income Statement, and debits to these accounts reduce net income. ### What must be debited when a revenue is earned but not yet received in cash? - [ ] Sales Revenue - [x] Accounts Receivable - [ ] Cash - [ ] Accounts Payable > **Explanation:** Accounts Receivable is debited to indicate that the company expects to receive payment in the future.

Thank you for exploring the nuances of debit (DR) in accounting and testing your comprehension with these detailed quiz questions. May your journey in financial knowledge continue to be insightful!

Wednesday, August 7, 2024
Debit and Credit
Debit
Accounting January 1, 1
Balance January 1, 1
Carried Down (C/D) January 1, 1
Carried Forward (c/f) January 1, 1
Closing Entry January 1, 1
Credit (CR) January 1, 1
Credit Entry January 1, 1
Debit January 1, 1
Debit Entry January 1, 1
Footing January 1, 1

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