The debit and credit statement is incorrect. It depends on if it's an Asset, Liability, Equity Revenue or Expense. Balance Sheet (Assets = Liabilities + Equity

The debit and credit statement is incorrect. It depends on if it's an Asset, Liability, Equity Revenue or Expense. Balance Sheet (Assets = Liabilities + Equity) Assets (debits increase, credits decrease) Liabilities (debits decrease, credits increase) Equity Accounts (debits decrease, credits increase) Income Statement (Revenue - Expenses = Income) Revenue Accounts (debits decrease, credits increase) Expenses (debits increase, credits decrease) A few rules: Balance Sheet Accounts carry over every year. Things like cash, accounts receivables and payables, loans and equity in the company carry over year after year. Income Statement Accounts close out at the end of the year and close in to the equity and cash parts of the balance sheet (depending if a dividend was declared). The Income statement accounts are zero at the beginning of every fiscal year. The balance sheet accounts carried over from the previous year. One example of the above to illustrate the mechanics of double entry accounting: Lets say you bought a car for your business in cash. you would credit cash (to decrease your cash account) and debit an asset account (a balance sheet account) for the car. when you depreciate the car over time you would credit the car account at some interval for the depreciation amount thus reducing its value and debit the expense in the current period thus increasing expenses in the current period. The reason I know this is because completed an undergrad at ASU in finance/accounting and then CS after that. It was waste of time.