📖 Click Here for Lesson
📕 Click Here to Hide Lesson
Every first-year accounting student wishes that he could use words like increase and decrease when talking about movements in account values.
If you heard our quantity of cash increased, it would be obvious that the company had more cash.
Unfortunately, accountants use the words debit and credit instead.
Here's where it starts to get complicated. Sometimes debit means increase, and sometimes debit means decrease. Same thing with credit.
The meanings of the words change depending upon the type of account you're dealing with.
For instance a debit of an asset account means it increased in value, but a debit of a liability account means it decreased.
Understanding what debits and credits mean for a given account is absolutely critical for reading financial statements.
Fortunately, there's a trick to it. If you memorize the table below, you're going to have a huge advantage over your peers when learning accounting.
Take a look at this table:
DC DEALER
| + DEBIT | CREDIT + |
| Draw | Liability |
| Expense | Equity |
| Asset | Revenue |
The three accounts under debit get larger when debited (and smaller when credited). The three accounts under credit get larger when credited (and smaller when debited).
If you read the first letter of each account name, first on the left column, then the right column, you'll notice that it spells out a word: DEALER.
Being able to recreate this table in your mind is absolutely crucial and is probably the most important item for accounting students to memorize.
Do note that there's a problem: both expense and equity start with an 'e'. You'll have to draw the table out on paper many times to make sure you remember where each of them go.