1. Chapter 4.2
Debit/Credit Theory

2. In ledger accounting it is critical to understand which side of an account a transaction will affect.

3. Accounting theory is based on understanding that all accounts have two sides
one which increases the accounts total, the other decreases the accounts total.

4. Each side of the account is described in the same way by all accountants
Debit – means the left side of the account
Credit – means the right side of the account

5. Sample T account
Cash + -
Debit
Credit
Loan - +
Debit
Credit

6. These two words are the bases for all accounting in ledgers and journals.
As accounts increase or decrease they will have a Debit entry (left side entry) or a Credit entry (right side entry) depending on what type of account it is.

7. Double Entry accounting system
We know that every transaction will affect at least two accounts, and that the changes must balance between these accounts.
It is also true that for every transaction there will be at least one debit entry and at least one credit entry.
The total debits of a transaction must also balance to the total credits of a transaction