Every financial transaction gives rise to two accounting entries:
- one debit
- one credit
The total value of debit entries in the nominal ledger should always be equal to the total value of credit entries.
- An increase in an expense or an increase in an asset is a debit
- An increase in income (eg a sale) or an increase in a liability (eg buying on credit) is a credit
- A decrease in an asset (eg making a cash payment) is a credit
- A decrease in a liability (eg paying a creditor) is a debit
The cash account:
