In the accounting cycle, the business transactions affect the debit and the credit side of an account in different ways depending with the nature of a particular transaction. Some transactions involve an increase the debit side and increase on the credit side while other transactions decrease the debit side as well as the credit side (Zinman, 2010).
The accounts that increase with the increase in debit include the expenses which are reported in the income statement and the asset account which is reported in the balance sheet statement. On the other hand, other accounts increase with credits which include owner’s equity that is reported on the balance sheet, the liabilities which are reported in the balance sheet and the contra accounts which have an opposite debit or credit balances which are reported in the balance sheet (Chasek, 2015).
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Examples of transactions which have two increases include where the organization purchase assets on credit. The asset will increase in the debit side, and the creditors will increase with the same amount on the credit side. Additionally, the transaction where there is two decrease arises in cases where there is cash paid to the holders of the bill payable. The asset cash decreases and the liability which is the bills payable on the side of credit also decreases.
Equally important, there are other transactions which result in an increase in the one hand of credit or debit as well as the decrease of credit or debit side (Chasek, 2015) . For example, the purchase of an operating business together with its assets means that the assets together with the liabilities will increase, but a decrease in the capital account will be decreased.
Reference
Chasek, N. E. (2015). U.S. Patent No. 5,420,405 . Washington, DC: U.S. Patent and Trademark Office.
Zinman, J. (2010). Debit or credit? Journal of Banking & Finance , 33 (2), 358-366.
