QB Issue Resolution:

QuickBooks Online uses double-entry accounting which means each transaction or event changes two or more accounts in the ledger. Each of these changes involves a debit and a credit applied to one or more accounts. For most forms in QuickBooks Online, the entries of debits and credits are handled by the system. However, understanding the ways debits and credits work will help you understand the basic functions behind transactions.

There are three basic components to each transaction: debits, credits and T-accounts. T-accounts got their name because they look like a capital T. The T-account represents the account affected by the transaction, and the amounts appear on the left or right side of the T depending on the transaction type. Debits always appear on the left side of the T and credits always appear on the right side of the T.

T account with debit and credit

The debits must equal the credits in each transaction, so there are always at least two T-accounts for each transaction. For example, let’s say you just made a sale. You’d enter a deposit to record the sales income. This is shown by a T-account for the checking and a T-account for the sales income.

Accounts for sales income and bank account

In order to show an increase in the checking account and an increase in income, the checking account is debited and the income account is credited. As you can see in this transaction, debiting an account will increase some account types and crediting an account will increase other account types. An easy way to determine whether you should debit or credit an account is to use the acronym ALICE.

Debit and credit and how accounts are affected

A= Asset
L= Liability
I= Income
C= Capital/Equity
E= Expenses

An asset usually carries a debit balance, a liability a credit balance, and so on, according to the chart.

Understanding how the accounts are affected will allow you to understand what to expect when entering transactions. For information about a report which shows debits and credits, see KB 1784.

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Answer ID 1281
Products QuickBooks Online Simple Start (H)
QuickBooks Online Essentials (H)
QuickBooks Online Plus (H)
Categories Using This Product
Date Created 11/13/2006 12:30 PM
Date Updated 03/29/2015 10:48 AM
Allow Crawling? Yes

Resolution for Issue 'How accounts are affected by debits and credits?' available: Yes (Solved).
Source: Intuit Community forum.

How accounts are affected by debits and credits?: this issue or error code is a known issue in Quickbooks Online (QBO) and/or Quickbooks. Support for this issue is available either by self-service or paid support options. Experts are available to resolve your Quickbooks issue to ensure minimal downtime and continue running your business. First try to resolve the issue yourself by looking for a resolution described below. If it is a complex issue or you are unable to solve the issue, you may contact us by clicking here or by using other support options.

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