Recording of debits and Credits for Asset Accounts

Assets are items owned by a company, such as inventory, accounts receivable, fixed assets like plant and equipment, and any other account under either current assets or fixed assets on the balance sheet.

Remember that debits are recorded on the left side of the T-account and credits are recorded on the right. Debits are increases in asset accounts. Credits are decreases in asset accounts. Here's the rule for assets:

Increases in assets are recorded as debits. This means they're recorded on the left side of the ledger. Decreases in assets are recorded as credits and are recorded on the right side of the ledger. 

Here is an example. Let's say a company wants to buy inventory to gear up for holiday sales. Inventory is a current asset. The company is going to pay for the inventory with cash. The amount of inventory to be purchased is $10,000. The journal entry would look like this:

Inventory $10,000

Cash $10,000

Inventory has increased so it is a debit and cash is a credit because it decreased.

If the company decided to sell a building for $250,000 and it received cash for the property, the journal entry would look like this:

Cash $250,000

Fixed Assets $250,000

Cash -- an asset -- increased so it would be debited. Fixed assets would be credited because they decreased.

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