You’re not alone if you need a debits and credits cheat sheet to keep your accounting processes quick and easy. One of the most common mistakes we see small businesses make is recording debits as credits and vice versa. The problem often becomes a tangled web by the time you track it down.
Having a printable cheat sheet for accounting debits and credits that you can keep at your desk or hand to your employee takes all the guesswork out of the equation. We’ve created one for you to utilize below.
GlassJar automatically handles the bookkeeping side of things for you. Our accounting software for small business posts the correct debit and credit to the correct accounts for every transaction you categorize, removing human error from the workflow. Learn more today!
Key Takeaways
- Debits increase assets and expenses.
- Credits increase liabilities, equity, and revenue.
- Every transaction records equal debits and credits across at least two accounts.
- Normal balances tell you which side an account carries so you can easily spot errors.
- GlassJar makes accounting a smoother experience by putting every transaction type on one screen.
What Are Debits and Credits?
Debits and credits are the two halves of every single accounting entry. A debit goes on the left side of an account, while a credit goes on the right side. Simple enough, right?
The confusion comes from the simple fact that not every debit means an “increase,” while not every credit means a “decrease.” It depends on the type of account you’re working with.
For example, a debit increases the balance of asset and expense accounts. A credit decreases the balance in those accounts. The opposite is true for liabilities, equity, and revenue. Credits will increase those accounts, while debits lower them.
To make matters even more confusing, debits and credits are used differently in your everyday language. A “debit” to your checking account reduces your balance, whereas a debit to the business’s cash account in the ledger raises it.
This disconnect is due to your bank and your business seeing the transaction from opposite sides. Your deposit is a credit on the bank’s books (a liability they owe you) and a debit on yours (an asset you own).
The accounting rules usually make more sense when you stop looking at debits as “money out” and credits as “money in.” It’s rarely that straightforward.
Understanding the Double-Entry Bookkeeping Method
A lot of this can be traced back to double-entry bookkeeping, which has been the standard for centuries. Every transaction puts a debit in one account and a credit in another. This makes mistakes glaringly obvious – total debits won’t equal total credits at the end of a period.
This involves a trial balance report, which lists every account’s debit or credit total. The sum should come out to zero when everything is correctly entered. Of course, it doesn’t always work out that way – there are discrepancies all the time, especially in small businesses.
You still have to untangle the web and try to find the error, but at least you’re made aware of it in real time rather than stumbling upon it during tax season or when you go to sell your business and a potential buyer starts digging into your books.
Accounting Debits and Credits Cheat Sheet
There are five main account types you’ll have to choose from when assigning debits and credits. So, we put together this quick accounting debits and credits cheat sheet you can refer back to:
| Account Type | Debit | Credit | Normal Balance |
| Assets | Increase | Decrease | Debit |
| Liabilities | Decrease | Increase | Credit |
| Equity | Decrease | Increase | Credit |
| Revenue | Decrease | Increase | Credit |
| Expenses | Increase | Decrease | Debit |
It’s perfectly fine if you still don’t really get it. Keep reading for that “Aha!” moment.
Assets
Anything your business owns is an asset – cash, equipment, inventory, accounts receivable. Debiting an asset account adds to its balance, while crediting subtracts from it.
For example, buying your new hire a laptop with cash means the equipment account gets debited (it went up) while the cash account gets credited (it went down).
Liabilities
This is the stuff your business owes. Think loans, accounts payable, credit card balances. Credits increase liabilities while debits decrease them. You’ll credit the loan payable account when you take out a bank loan, in turn debiting the cash account. You reverse the entry when you pay back the loan.
Equity
Equity is the owner’s stake in the business after liabilities are subtracted from assets. Credits increase equity; debits decrease it. So, the owner investing an influx of cash will credit the equity account. Owner draws (money taken out of the business) debit it.
Revenue
This is specifically the income that comes from normal business operations. Credits will increase revenue while debits decrease it. You credit revenue and debit cash (or accounts receivable) when a client pays for services, or a sale gets made.
Note: Revenue accounts can carry credit balances. They reset to zero at the start of each accounting period.
Expenses
Expenses are obviously your operating costs: rent, payroll, supplies, utilities. Debits increase them, credits decrease them. You’ll debit the rent expense account each month as you credit cash. Like revenue, expense accounts close out at the end of each period.
Normal Balances Explained
You’ll see our printable debits and credits cheat sheet references something called “Normal Balance.” This is where an account’s balance naturally sits.
Assets and expenses carry normal debit balances. Liabilities, equity, and revenue carry normal credit balances. Knowing the normal balance for each account type is the fastest way to catch errors without having to review each individual transaction.
Here’s another way to look at it. If your cash account (an asset) has a credit balance, the books record more outflows than ever came in – that’s just not possible. An entry is wrong.
Similarly, a revenue account carrying a debit balance suggests you recorded more refunds or adjustments than actual sales. While it’s possible, it’s unlikely and warrants investigation.
All of this is to say, get in the habit of scanning a trial balance for accounts sitting on the wrong side. It only takes a few seconds, and you’ll catch mistakes that would otherwise become more and more tangled over multiple periods.
Debits and Credits in Accounting: Cheat Sheet Example
We’re visual learners ourselves, so thought it might be helpful to give you a few common transactions so you can see how debits and credits work in practice.
Purchasing office supplies for $500 cash
Debit: Office Supplies (expense) $500
Credit: Cash (asset) $500
The expense account increases, cash decreases. Both sides equal $500.
A client pays a $3,000 invoice
Debit: Cash (asset) $3,000
Credit: Accounts Receivable (asset) $3,000
Cash goes up, the receivable goes down. Revenue was already recorded when the invoice was originally sent.
Making a $1,200 loan payment ($1,000 principal + $200 interest)
Debit: Loan Payable (liability) $1,000
Debit: Interest Expense (expense) $200
Credit: Cash (asset) $1,200
The principal amount comes out of liability, you recognize an interest expense, and you decrease cash by the full payment.
The Key Takeaway
Every entry balances, and that’s the logic behind every accounting debits and credits cheat sheet: figure out which accounts are involved, determine the account type for each, and record the correct side. No need to overthink it!
How a General Ledger Helps Small Businesses
Your business should have a general ledger where every debit and credit ever recorded lives. It’s to be organized by account. You’ll have sub-ledgers for accounts receivable and accounts payable that feed into the general ledger. All financial statements pull from it.
Think of this as your small business’s system of record. It’s invaluable if you’re handling your own books, or letting a junior employee take care of them. Each entry from the credits and debits cheat sheet posts here at some point or another. You can rest assured your income statement and balance sheet are accurate as long as your ledger is dialed in.
GlassJar handles the ledger on your behalf. You simply categorize a transaction and the correct debit and credit post to the proper accounts. You don’t have to write a journal entry yourself. This takes the stress out of bookkeeping and eliminates the most common error we see made.
Whether you’re looking for a Zoho alternative or Xero alternative, we’re excited to show you what GlassJar can do for your business – learn more today!
Bottom Line on Debits and Credits
We hope our debits and credits cheat sheet leaves you feeling confident in keeping your books balanced and accurate. Debits and credits follow five rules, one per account type, and the patterns click fast when you have a good reference available while you work.
But whether you’re tired of dealing with the common complaints about QuickBooks or just don’t want to deal with figuring out debits and credits yourself anymore, GlassJar can help. Start your 14-day free trial today!
Frequently asked questions
What is the easiest way to remember debits and credits?
Use our printable debits and credits cheat sheet above and you’ll never have to play the guessing game again – OR, better yet, set up a GlassJar account and let our software handle credits/debits on your behalf.
Can you provide a cheat sheet for debits and credits?
Yes. We provided one above on this page that covers all five account types (assets, liabilities, equity, revenue, and expenses). You can see whether a debit or credit increases or decreases the account in each row – and the normal balance it carries.
How do I determine between debits and credits?
Figure out the account type first. Assets and expenses take debits to increase. Liabilities, equity, and revenue take credits to increase. Or, you can just use GlassJar to take the uncertainty out of small business finances!
