The Debit and Credit Rule

Table of Contents
 

On this Page!

Dr Cr Rules

In a Table

Short

Dr and Cr Rules

 

There are five types of accounts:

  • Assets
  • Liabilities
  • Owner's Equity
  • Revenue
  • Expenses

The following types INCREASE if you DEBIT the entries in the ledger (ie place the entry on the LHS).

  • Asset
  • Expenses

The following account types INCREASE if you CREDIT them in the ledger (ie place the entry on RHS)

  • Liability
  • Owner's Equity
  • Revenue

Opposite actions will decrease the accounts.

Credit - Assets and Expenses and they would decrease.
Debit - Liability, OE and Revenue and they would decrease.

The Rule in a Table

 
To INcrease
To Decrease
Assets
Debit
Credit
Liability
Credit
Debit
Owner's Equity
Credit
Debit
Revenue
Credit
Debit
Expense
Debit
Credit
 

  • or Looking at the rules in another way - What happens to an account
    • when a Debit entry is made
    • When  a Credit entry is made
 
 
Debit
Credit
Assets
+
-
Liability
-
+
Owner's Equity
-
+
Revenue
-
+
Expense
+
-
  • Asset
    • To increase an Asset, Debit it.
    • To decrease an Asset, Credit it.
  • Liability:
    • To increase a Liability, Credit it.
    • To decrease a Liability, Debit it.
  • Owner's Equity Accounts (Capital, Drawings, Profit and Loss summary, Asset Reserve)
    •  To increase Owner's Equity , Credit it.
    • To decrease Owner's Equity , Debit it
  • Revenue:
    •  To increase Revenue , Credit it.
    • To decrease Revenue , Debit it
  • Expense
    • To increase an Expense, Debit it.
    • To decrease an Expense, Credit it.

Simple way to Remember the Rule:

  • Let the account types be represented by their first letters - A L O E & R
  • Rearrange them to:  OALER ie Owner's Equity, Asset, Liability, Expense & Revenue.
  • its pronounced 'oiler'
  • Let C represent Credit side and D represent Debit side.
  • If you know your abc ..., you'll realise 'C' comes before 'D'.
  • if you put the "c' first and then 'd' alternatingly on OALER you get the rule for increasing those accounts

To increase these accounts:
O
A
L
E
R
Place the entry on this side:
C
D
C
D
C
 

 

How can I remember this?

  • remember and write the acronym OALER
  • C comes before D (C for Cr and D for Dr)
  • write C D C D C on top of OALER and its all about increasing the accounts.
  • this is all you have to remember, because the decreasing of accounts is the opposite of this.
    • if by Crediting OE increases it, than the opposite will hold true: Debit will decrease it.