Online Business Accounting

Basic Accounting Question - debits/credits?

Okay so I am new in accounting and I can seem to understand this concept. I know the basic formula is: Assets = Liabilities + Assets and that debit means "left" side and credit means "right" side Example: Account Name Debit Credit Bank Service Charge Expense 35 Cash 35 If there is a decrease in cash (which is an asset, left side of equation) then there is a credit to cash. However, I do not understand why a bank expense charge would be debited. If you are debiting, wouldn't you be decreasing liability? Or is the bank expense charge also considered an asset? I am confused here... It seems like expenses are considered as assets? Is this true? I thought expenses were used to find retained earnings: revenues - expenses Or is this a different kind of expense???

Public Comments

1. how about taking homework to homework section!!!
2. First of all, look at your equation again - should be assets = liabilities + equity. Expenses are increased by a debit and reduced by a credit. It takes a while to get all of this debit and credit stuff straight. Why don't you make a little cheat sheet to have in front of you when you're working on your homework. That will help you memorize it quicker. To answer your question, recall that both the revenue and expense accounts will be closed out to the income summary account at fiscal year end b/c they are temporary or nominal accounts. Then then income summary account is closed out to retained earnings. You may not have gotten this far in your class yet??? So, your $35 bank charge expense would be debited b/c you're increasing the expense. Cash is credited b/c you're decreasing the cash account. Practice with your t-accounts and you'll start to get the picture.