Permanent Accounts, Debit and Credit Balances

Permanent Accounts

Permanent accounts are all of the balance sheet accounts, these accounts do not close at the end of an accounting period (asset accounts, liability accounts, owner's equity accounts except for the owner's drawing account).  

The Bank (P) account in the following example is a permanent account, each time one receives money its balance value increases and each time when one spends money its balance value decreases. Permanent accounts are important at a certain moment in time, answering question like How much money do I have now? Their balance value is of importance as it increases and decreases.

Note: Permanent accounts can be both debit and credit balances.

Credit Balances

Credit Balances are accounts that have their ending amount on the right side of a general ledger account, these accounts increase on the right (credit) side of its balance and decrease on the left side of its balance. Normally these balances represent Revenues (income, gains, services) and Liabilities (salaries, providers, credits).

The Revenue (C) account in the following example is a credit balance, each time one receives a salary this account, having a credit balance, increases. Credit accounts are important during a running period, answering questions like How much did I earn this year? Their balance value is of less importance as it only increases over time.

Debit Balances

Debit Balances are accounts that have their ending amount on the left side of a general ledger account, these accounts increase on the left side of its balance and decrease on the right side of its balance. Normally these balances represent Assets (bank, cash, Inventory), Receivables (customers), Expenses (Transport, Food, Salaries Rent etc. ) and Loss (Discounts, Refund, Corrections, adjustments).

The Expenses account in the example is a debit Balance, each time money is spend on gasoline this account increases. The debit accounts are important during a running period, answering questions like How much did I spent on Gasoline this month? Their balance value is of less importance as it only increases over time. 

   

How this looks on bkper

The Accounts

The Transactions 

Note: The left menu shows the balance values of each account according to the account type and grouping.  

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