[jdagna]

I thought I would share a quick trick that an undergrad acct teacher taught me once. To figure out quickly weather something should be a debit or credit just draw a quick chart based on the equation:
Assets(A) = Liabilities (L) + Owners Equity (OE).

A = L + OE
Dr Cr = Dr Cr
+ – = – +

So for example if you have a journal entry with cash (Asset) (A) and want to increase it + (eg received cash), then look at the chart for the plus + sign, and it would be a debit. On the other side of the equation for liabilities and owners equity, to increase look for the plus + and it would be a credit. I think I have written this on every test I took as a quick reference. That way half way through a test if my brain is fried and I am struggling whether something should be a debit or credit I can figure out what the account is related to (asset, liaility, or owners equity) and weather I want to increase or decrease, look at the chart and I will quickly know.

Hope this makes sense written out and helps someone. 🙂

[jdagna]

By the way this looks a lot better if you just do the A = L + OE with a T account on each side of the equation and a plus + or minus – in the Dr or Cr area. I just couldnt do that in this forum.

[Missy]

That's great for the balance sheet but for income statements also remember DEAD COIL

Debit expenses, assets, and draws

Credit owners equity, income and liabilities.

Licensed Massachusetts Non Reporting CPA since 2012
Finance/Admin/HR Manager

[GiniC]

My Intermediate instructor gave us a mnemonic that has served me well for nearly five years now:

The word below is the mnemonic; the outer edges (A and E) have natural debit balances, and the inner letters have natural credit balances. It's on my computer monitors and I can jot it down quickly anytime I need to keep it straight (though at this point it has become “second nature”.

A L O R E is the word – read down for the meaning of each letter.

The letters stand for
Assets
Liabilities
Owners' Equity
Revenue
Expenses

These five categories cover just about everything you'll encounter on the balance sheet and income statement.

[Anonymous]

Understanding how the balance sheet and income statement work together is ultimately the only way to understand debits and credits. You can play memorization games all you want, but you are a almost a CPA. Think logically and read/study for understanding. I promise if you do, one day the lights will click on and you will never look back.

[RyonT]

Forgive me for coming off like a smart*ss, but how many people taking the CPA exam don't know this? Debits/Credits is a 100 level accounting class.

[Anonymous]

^^ Yes, RyonT that's exactly what you're coming off as. It may seem odd to you, but there are a lot of people on this forum who do not work in the field in which they're preparing to sit for the exam. There are some people who tend to perform some of the same duties on a daily basis or who have been out of school for many years. heck, there are individuals who did not effectively learn this information last year if they are a recent graduate. To go one step further, imagine prepping for AUD/BEC/REG and asking a question to someone who has worked in auditing/dealing w/economics and cost mgmt/tax forever–you may sound ignorant for lack of a better word. This forum is designed to assist and not to break down–shame on you for not knowing the difference. I for one am very happy that someone took time to post little tricks that they thought were helpful.

I'm tired of operating in fear and mediocrity. It's time to try. It's time to do. It's time to go.

[RyonT]

I honestly meant no offense. All I was saying is that it is literally the first thing you learn in your first college accounting course. I don't know about your state, but in mine I had to have a lot of accounting classes to even be able to sit. It really didn't occur to me that anyone sitting for the exam didn't know that. If you are one of those people and you are taking these exams, then I applaud you. I know I wouldn't be able to do it.

[Missy]

Ryon I think unless you're in a class or doing journal entries full time it's very easy to lose track of the basics. Heck I learned how to do a proper footnote in the 7th grade it's one of the foundations of writing a paper but would have to Google how to do one now.

Licensed Massachusetts Non Reporting CPA since 2012
Finance/Admin/HR Manager

[Anonymous]

The way I learned it was “ADE” (Aid): all your (A)ssets, (D)epreciation and (E)xpenses are your normal debit balance items. The only thing that is hard about this method is that you have to know all your asset accounts. Ahh… I remember the good ol' days of Accounting 101….(sniffs the air)

[jdagna]

Thank you for everyone that posted some more tips/tricks.

And yes, this is basic accounting 101 but at the end of a 4 hour test when you don't even know your name anymore a basic accounting trick may be able to help you answer a question or fill in part of a SIM that could be the extra .5% you need to pass.

I for one am a “non-traditional” CPA exam taker…I was in the banking industry for 15 years before I decided to take this journey (which I question myself daily why lol). Debits and Credits are very different in banking, so maybe that, combined with the fact that I don't have a job that I work with them on a daily basis, is why I will always go back to the basic accounting 101 tricks above. Everyone has different strengthens and weaknesses in this exam and in general, so whats easy for one person may not be for another.

[Author]

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