Assets and expenses have natural debit balances. This means positive values for assets and expenses are debited and negative balances are credited. For example, upon the receipt of $1,000 cash, a journal entry would include a debit of $1,000 to the cash account in the balance sheet, because cash is increasing.

Asset accounts represent the different types of economic resources owned or controlled by an entity. Common examples of asset accounts include cash in hand, cash in bank, receivables, inventory, prepaid expenses, land, structures, equipment, patents, copyrights, licenses, etc.

Tip. When you record a fixed asset, you debit the Fixed Assets account for the purchase price and credit the Cash or Loan account. Later you reduce the value in Fixed Assets to reflect the asset’s depreciation over time.

Debits and credits chart

Debit	Credit
Increases an asset account	Decreases an asset account
Increases an expense account	Decreases an expense account
Decreases a liability account	Increases a liability account
Decreases an equity account	Increases an equity account

Since the normal balance for owner’s equity is a credit balance, revenues must be recorded as a credit. At the end of the accounting year, the credit balances in the revenue accounts will be closed and transferred to the owner’s capital account, thereby increasing owner’s equity.

A debit increases asset or expense accounts, and decreases liability, revenue or equity accounts. A credit is always positioned on the right side of an entry. It increases liability, revenue or equity accounts and decreases asset or expense accounts.

The debit entry of an asset account translates to an increase to the account, while the right side of the asset T-account represents a decrease to the account. This means that a business that receives cash, for example, will debit the asset account, but will credit the account if it pays out cash.

Cash is classified as a current asset on the balance sheet and is therefore increased on the debit side and decreased on the credit side. Cash will usually appear at the top of the current asset section of the balance sheet because these items are listed in order of liquidity.

Your credit sales journal entry should debit your Accounts Receivable account, which is the amount the customer has charged to their credit. And, you will credit your Sales Tax Payable and Revenue accounts.

On the income statement, the sale is recorded as an increase in sales revenue, cost of goods sold, and possibly expenses. The credit sale is reported on the balance sheet as an increase in accounts receivable, with a decrease in inventory.

Different Types of Assets and Liabilities?

• Assets. Mostly assets are classified based on 3 broad categories, namely –
• Current assets or short-term assets.
• Fixed assets or long-term assets.
• Tangible assets.
• Intangible assets.
• Operating assets.
• Non-operating assets.
• Liability.

The petty cash account is a current asset and will have a normal debit balance (debit to increase and credit to decrease).

A house, like any other object that comes into your possession, is classified as an asset. You can offset the value of the asset with the value of the mortgage, your liability. Your house, an asset, subtracted by your remaining mortgage, your liability, results in your wealth due to your house.

A home is an asset, but your mortgage is a liability. Because a mortgage is debt, you need to pay it off before your home is really considered an asset. It is an asset because it is your property.

Blueleaf’s position: Your primary residence is an expense, not an asset. It’s not as liquid as you think and many people hold onto their homes later or sell earlier than their plan dictates so they can try to time the real estate market.

How to Make a House an Asset

1. There are three common house hacking strategies: Renting out an additional dwelling unit.
2. Renting Out an Additional Dwelling Unit.
3. Traditional House Hacking.
4. Renting by Room.
5. Short-Term Rentals.

7 Ways to Turn Your Home Into a Money-Making Property

1. Add a Rental Suite.
2. Rent out Accommodation.
3. Run a Bed and Breakfast.
4. Rent out Storage Space.
5. Become a Market Gardener.
6. Hold Events.
7. Start a Home-Based Business.
8. Before You Turn Your Home Property Into an Income Property.

If you’re a homeowner, chances are you’re worth much more than someone who rents, according to the Federal Reserve’s 2020 Survey of Consumer Finances. Homeowners have a net worth that is more than 40 times greater than their renter counterparts, which reinforces the idea that owning a home is a smart financial move.

Examples of current assets include: Cash and cash equivalents: Treasury bills, certificates of deposit, and cash. Marketable securities: Debt securities or equity that is liquid. Accounts receivables: Money owed by customers to be paid in the short-term. Inventory: Goods available for sale or raw materials.

In a nutshell, your net worth is really everything you own of significance (your assets) minus what you owe in debts (your liabilities). Assets include cash and investments, your home and other real estate, cars or anything else of value you own.

Common types of assets include current, non-current, physical, intangible, operating, and non-operating….Examples of operating assets include:

• Cash.
• Accounts receivable.
• Inventory.
• Building.
• Machinery.
• Equipment.
• Patents.
• Copyrights.

The 9 Best Income Producing Assets to Grow Your Wealth

1. Stocks/Equities. If I had to pick one asset class to rule them all, stocks would definitely be it.
2. Bonds.
3. Investment/Vacation Properties.
4. Real Estate Investment Trusts (REITs)
5. Farmland.
6. Small Businesses/Franchise/Angel Investing.
7. Peer-to-Peer Lending.
8. Royalties.

Here are some of the most common income generating assets to be aware of:

• Real Estate Assets.
• Stocks.
• Savings Accounts.
• Certificates Of Deposits.
• Private Equity Investing.
• Peer-to-Peer Lending.
• Building a Business.

10 income-producing assets to buy

• Online Business. One of the most popular and profitable ways to invest is to start your own business online.
• Stocks.
• Rental units.
• Recession-proof brick and mortar businesses.
• Certificates of Deposit.
• Real Estate Investment Trusts (REITs)
• Peer to Peer Lending.
• Bonds.

Here’s the list of the 7 best income producing assets that you can invest in to start earning passive income.

1. Certificates of deposit (CD’s)
2. Bonds.
3. Real estate investment trusts (REITs)
4. Dividend yielding stocks.
5. Property rentals.
6. Peer-to-peer lending.
7. Creating your own product.