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Welcome to the next Durham College Student Academic Learning Services video on debits
and credits.
If you have not watched our introduction to debits and credits, I recommend you do so
before continuing without this current video.
In this video we are going to talk about the effect that debits and credits have on asset
accounts.
Let’s begin.
Before we do our example, we need to expand the accounting equation.
We do this because Equity is made up of four different account types that change the equation
in different ways.
Instead of Equity, we’re going to use Capital, Withdrawals, Revenues, and Expenses.
Notice that Withdrawals and Expenses have negative signs in front of them.
That means that whatever the balances in those accounts are, those balances are subtracted
from the equation.
When those accounts increase in value, they actually cause the right side of the equation
to decrease.
Again, an increase in the account causes a decrease in the equation.
Arrows will be used to show the effect of debits and credits on the different types
of accounts (up arrow for increase, down arrow for decrease).
Remember that debits are on the left side of the t-charts, and credits on the right.
In this example, the company purchases $500 of supplies using cash.
Both the supplies purchased and the cash used are assets of the company, so this transaction
takes place only on the left side of the accounting equation.
The value of the supplies is increasing, so that account is debited.
The value of the cash is decreasing, so that account is credited.
Because one asset account is going up and another asset account is going down by the
same amount, the two events cancel each other out, and the equation stays balanced
That brings us to the end of this video on debits and credits.
Be sure to watch our other videos to learn how debits and credits affect different account
types.
If you have any questions about this material, I encourage you to come to the SALS centre,
located in room 204 of the Student Services Building, and make an appointment with the
appropriate Learning Skills Advisor.
Thank you for watching.