![]() For instance, if a cash account is debited, it means that the amount of cash in the company has increased whereas when an accounts payable is debited, it means that the amount in the accounts payable has reduced. There can be considerable confusion about how debits and credits work. The total debit for any transaction must be equal to the credits for the same transaction which is why the two-column transaction recording format is used for recording debits and credits. This is done in order to maintain the balance of the books of accounts which ensures accuracy in a company’s accounting. Whenever a company performs any transaction, two accounts in its balance sheet are affected with one getting a debit entry and the other getting a credit entry. Credit is generally placed on the right side of an accounting entry. A credit is an accounting entry that decreases an expense or asset account or increases a liability, equity, or revenue account. A debit is generally placed on the left side of an accounting entry. If debits and credits are not properly accounted for, your balance sheet will be unbalanced.Ī debit is an accounting entry that decreases a liability, equity, or revenue account or increases an expense or asset account. In order to keep accurate financial records, understanding how to record debits and credits is important. When a company purchases any asset whether tangible or intangible, it has to be recorded in its books of account in order to ascertain its total assets, liabilities, and equity. Equipment debit or credit? Debit and credit In order to fully understand why equipment is a debit and not a credit, we will take a look at what debit and credit mean and how companies account for equipment in their financial records. Some examples of equipment include car lifts, computers, trucks, drills, excavators, cars, tractors, etc. They are considered long-term assets because they cannot be easily converted to cash. These are considered capital investments that ease the performance of certain tasks and could bring about positive economic benefits to the company over time. They are fixed, long-term assets that companies utilize to perform certain operations. We shall discuss further why equipment is a debit and not credit in the balance sheet hereafter but before then, let us understand what we mean by equipment.Įquipment is usually classified under the assets section on a company’s balance sheet. However, for someone who is not conversant with how companies keep records of their various financial transactions, equipment being a debit might seem confusing. When a piece of new equipment is bought, it has to be recorded among the physical assets of the company and as time goes by and these assets depreciate or are sold off, they also have to be accounted for in the company’s book of accounts.Įquipment is recorded as assets on the company’s balance sheet, this makes them a debit and not a credit. This equipment will vary from one company to the next based on the sector in which they operate.īusinesses that are already in existence also have certain equipment which they use for the daily running of their business such as trucks, telephones, copy machines, computers, etc. ![]() As a new company trying to kick off, you will need certain kinds of equipment to run your company which may include furniture, vehicles, computers, printers, machines, etc.
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