If debits and credits feel like guesses, pause before learning more formats. A reliable bookkeeping method starts with the business event: what did the business receive, what did it give up, and which accounts changed? The original examples here use a simple service business and amounts in dollars. The same double-entry reasoning works with other currencies.
Start with account types
| Account type | Increase | Decrease |
|---|---|---|
| Asset | Debit | Credit |
| Expense | Debit | Credit |
| Liability | Credit | Debit |
| Capital | Credit | Debit |
| Income | Credit | Debit |
Debit and credit describe sides of an account; they are not labels for good and bad transactions. Bank is an asset when it has a positive balance. Paying an expense reduces that asset, so the bank entry is a credit while the expense entry is a debit. Drawings reduce the owner's interest and are recorded separately from business expenses.
Worked example: four business transactions
Assume a new service business has no opening balances. The owner deposits $2,000 into its bank account, it buys equipment for $500 by bank transfer, pays $100 rent and receives $300 for services already provided. Ignore tax and depreciation in this introductory example so you can focus on the two entries for each event.
| Transaction | Debit | Credit |
|---|---|---|
| Owner invests $2,000 | Bank $2,000 | Capital $2,000 |
| Buy equipment for $500 | Equipment $500 | Bank $500 |
| Pay rent of $100 | Rent expense $100 | Bank $100 |
| Receive $300 service income | Bank $300 | Service income $300 |
The bank balance is $2,000 − $500 − $100 + $300 = $1,700. Equipment is an asset, so do not treat its full purchase price as a rent-like expense. Also notice that the owner's investment is capital, not income earned from customers. These distinctions matter even though cash enters or leaves the same bank account.
Build the trial balance from account balances
| Account | Debit balance | Credit balance |
|---|---|---|
| Bank | $1,700 | — |
| Equipment | $500 | — |
| Rent expense | $100 | — |
| Capital | — | $2,000 |
| Service income | — | $300 |
| Total | $2,300 | $2,300 |
Transfer closing account balances, not every individual transaction, into the trial balance. Equal totals show that recorded debit balances equal recorded credit balances. They are a useful check on the bookkeeping, but they do not answer whether every business event was recorded correctly.
Understand errors a trial balance cannot reveal
If the rent payment is omitted from both accounts, the totals can still agree. If the equipment purchase is wrongly debited to an expense account while bank is correctly credited, equality also remains. In the second example, the classification is wrong even though the arithmetic balances. Ask what happened to assets, expenses and profit as well as whether the columns add up.
Move from bookkeeping to exam questions
Once these basics are secure, practise credit transactions, adjustments and financial statements using your syllabus. Work through a question before opening the solution. When an answer differs, trace it back to the original transaction instead of changing the final figure until the totals match. Use our past-paper guide to organise corrections.
Check coverage and exam-year documents on the Cambridge IGCSE Accounting 0452 page. O Level students should use their own syllabus and papers. For feedback on account layouts and working, see our Accounting tutoring.
Frequently asked questions
01Does debit always mean an increase?
No. A debit increases an asset or expense account, but decreases a liability, capital or income account. Identify the account type before deciding which side to use.
02Why can a trial balance agree when an entry is wrong?
Some errors preserve equal debit and credit totals. Completely omitting a transaction or posting equal amounts to the wrong accounts can leave the trial balance balanced.
03How should I revise Accounting calculations?
Practise a complete transaction sequence, show account names and working, then explain why each entry belongs on its side. Correct the reasoning before repeating a timed question.
