Last week we discussed the first golden rule of accounting which was about the double entry system which involves recording the effects of each transaction as debits and credits.

This week we’re going to discuss the second golden rule of accounting which is: The left-hand side of an account is the debit side and the right-hand side is the credit side.

An account is often called a T account because of the way it is structured, the debit on the left, credit on the right and the title of the account on the top.

If this seems unfamiliar to you, then just think of your current account which has the same set of rules with debits on the left and credits on the right.

One of the difficult and confusing parts of accounting is remembering how different types of transactions are recorded in different T accounts. There are clear rules however so this part is about remembering the following rules:

Asset Accounts: Increased with debits and decreased with credits

Liabilities & Capital Accounts: Decreased with debits and increased with credits.

So how do you remember which side is which?

Well, think of the rock and roll band AC/DC and think for every account (AC) there is a debit (D) and a credit (C). Think debits come before credits and therefore debits are on the left and credits are on the right.

Ref: The 80 Minute MBA by Richard Reeves & John Knell

Part 1: The First Golden Rule of Accounting

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