If you do your own bookkeeping or work as a bookkeeper for someone else, there are some important accounting rules and terms you need to remember. We have also included a chart to help you with knowing when to use a debit or a credit in an equation.
Rule 1: Total debits must always equal total credits
Rule 2: Debits are always on the left
Rule 3: Credits are always on the right
Assets- Assets are things you own. Typically these include cash, money in the bank, money owed to you (receivables), inventory, equipment and other property.
Liability- Liabilities are things you owe. Typically these include money owed to others (payables), credit card debt, payroll taxes due, sales tax due, and loans.
Equity- Equity is what the owners of an entity have invested in an enterprise. This can include stock, owner’s investment and the value left in the business after the assets are used to pay off any outstanding liabilities.
Revenue- Revenue is the income that a business generates from its normal business activities. Typically these include income generated from the sale or products and/or services.
Expenses- Expenses are the costs incurred in operating the business. Typically these include such things as wages, rent, dues, supplies, and the like.