I just need an example
• What increases the Asset account, a debit or a credit?
• What decreases the Asset account, a debit or a credit?
• What is the normal balance of the Asset account, a debit or a credit?
Account Changes
Account Categories What increases the account? What decreases the account? What is the normal balance?
Assets
Liabilities
To understand the impact of debits and credits on the Asset account, we need to have some knowledge of the double-entry accounting system. In this system, every transaction affects at least two accounts, and the changes are recorded using either a debit or a credit.
1. What increases the Asset account, a debit or a credit?
In the accounting equation (Assets = Liabilities + Equity), the Asset account represents the resources owned by the company. Increases in the Asset account are recorded as debits. This means that when you receive or acquire an asset, it is debited to increase the balance of the Asset account.
For example, let's say a company purchases a new computer for $1,000. The entry to record this transaction in the general ledger would be:
Debit: Computer Equipment (Asset account) $1,000
Credit: Cash or Accounts Payable (Liability or Equity account) $1,000
The debit to the Asset account increases the balance by $1,000, indicating the acquisition of a new asset.
2. What decreases the Asset account, a debit or a credit?
Conversely, decreases in the Asset account are recorded as credits. When assets are used up, sold, or otherwise decreased, they are credited.
For example, if a company sells an old computer for $500, the entry to record this transaction would be:
Debit: Cash or Accounts Receivable (Asset account) $500
Credit: Computer Equipment (Asset account) $500
In this case, the credit to the Asset account reduces the balance by $500, representing the decrease in the asset's value.
3. What is the normal balance of the Asset account, a debit or a credit?
The normal or default balance of the Asset account is on the debit side. This means that in most cases, the Asset account will have a debit balance. Since increases in the Asset account are recorded as debits, it is considered the normal balance for this account category.
However, it's important to note that some asset accounts, such as Accumulated Depreciation, have a credit balance. This is because the accumulated depreciation represents the decrease in the value of the related asset over time, and it is recorded as a credit.
In summary, to increase the Asset account, you would record a debit. To decrease the Asset account, you would record a credit. The normal balance of the Asset account is on the debit side, but certain asset accounts, like Accumulated Depreciation, can have a credit balance.