Contra information is always reported in parenthesis. Well, other information in the two primary financial statements is also reported using parenthesis. This lesson explains parenthesis in balance sheet accounts.
Debits are one side of the dual entry found in accounting. Customarily located in one of the journals from a source document; debits are transferred to the appropriate ledger (account) into the debit column and update the running balance for that particular account. Certain types of accounts customarily have debit balances and include, assets, cost of sales and expenses.
The equity section of the balance sheet identifies the approximate dollar value of net worth accrued to the owners/investors. Equity type accounts can have both credit and debit balances. By far the most preferred is a credit value. Debit values does not mean that something is wrong, actually it can be a great sign of a good operation.
The Purchases Journal keeps track of the entries related to the cost of sales (cost of goods sold) accounts. As with all journals, the entries are in chronological order by date and identify both the debit and credit sides of the equation. In this case, cost of sales is customarily recorded via debits.
Debits and credits are two words that are the most recognized terms synonymous to bookkeeping and accounting. I have read over 30 different articles as to how other authors define debits and credits with bookkeeping. Several authors try to get the reader to visualize the terms as the left side and the right side of the ‘T’-Account (I also describe this in Lesson 2).