What are the rules of debit and credit in double entry?

Assets and expenses increase on the debit side and decrease on the credit side. Liabilities, owner's equity (capital) and income increase on the credit side and decrease on the debit side. A useful memory aid is DEAD CLIC: Debit for Expenses, Assets and Drawings; Credit for Liabilities, Income and Capital. Every transaction is recorded with at least one debit and one equal credit so the books stay in balance.

What is a ledger or T-account?

A ledger account, drawn as a T-account, has the account name across the top, debit entries on the left and credit entries on the right. Each entry shows the date, the name of the other account involved, and the amount. Recording a transaction means entering the same amount as a debit in one account and a credit in another, which is the double entry.

How do you record capital, drawings and expenses?

Capital introduced is credited to the capital account and debited to bank or cash (an asset increases). Drawings are debited to the drawings account and credited to bank, cash or inventory (the asset taken out decreases). An expense paid is debited to the relevant expense account and credited to bank or cash. Each follows the debit and credit rules for its element.

How are credit purchases, credit sales and returns recorded?

A credit purchase is debited to purchases and credited to the supplier (trade payable). A credit sale is debited to the customer (trade receivable) and credited to sales. Returns inwards (goods a customer returns) are debited to returns inwards and credited to the customer. Returns outwards (goods sent back to a supplier) are debited to the supplier and credited to returns outwards.

How do you balance off a ledger account?

Total both sides, find the difference, and enter it as the balance carried down (balance c/d) on the smaller side so the two totals agree. Then bring the same figure down on the opposite side below the totals as the balance brought down (balance b/d), which is the opening balance for the next period. A debit balance b/d means an asset, expense or drawings; a credit balance b/d means a liability, capital or income.

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The double entry recording system: O-Level Principles of Accounts (SEAB/Cambridge 7087), covering the rules of debit and credit for the five elements, recording in ledger (T) accounts, double entry for cash and bank, double entry for credit purchases, sales and returns, and balancing off the ledger

An O-Level Principles of Accounts (SEAB 7087) overview of the double entry recording system: the rules of debit and credit for the five elements, recording in ledger (T) accounts, the entries for cash, bank, capital, drawings, expenses, credit purchases, credit sales and returns, and how to balance off an account.

Generated by Claude Opus 4.87 min readSEAB-7087Updated 2026-06-13

Reviewed by: AI editorial process; not yet individually human-reviewed

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What this module trains
The rules and the ledger
Posting the common transactions
Balancing off an account
Check your knowledge

What this module trains

Double entry is the engine of O-Level Principles of Accounts (SEAB/Cambridge 7087). Once you can apply the rules of debit and credit, record in T-accounts, and balance an account off, almost every later task (the trial balance, the year-end adjustments and the financial statements) becomes a matter of careful, repeated technique. The 7087 papers test this directly, asking you to post named transactions and to balance accounts cleanly, so the goal of this module is to make the mechanics automatic.

This guide links the five dot points of the module, each with its own page and practice. The subject hub is at /sg-o-level/accounting and the syllabus index at /sg-o-level/accounting/syllabus.

The rules and the ledger

The debit and credit rules dot point sets out how each of the five elements behaves and what its normal balance is. The rule is summarised by DEAD CLIC: debit increases Expenses, Assets and Drawings; credit increases Liabilities, Income and Capital. The recording in ledger accounts dot point shows how to enter a transaction in T-accounts, with equal debit and credit, so the books always balance.

Posting the common transactions

The double entry for cash and bank dot point covers capital introduced, drawings and expenses, all routed through cash or bank. The double entry for purchases and sales dot point covers credit purchases, credit sales, and returns inwards and outwards, and explains why purchases and sales are kept in separate accounts. A handy summary:

Capital introduced: debit bank or cash, credit capital.
Drawings: debit drawings, credit bank, cash or inventory.
Expense paid: debit the expense, credit bank or cash.
Credit purchase: debit purchases, credit the supplier (trade payable).
Credit sale: debit the customer (trade receivable), credit sales.
Returns inwards: debit returns inwards, credit the customer.
Returns outwards: debit the supplier, credit returns outwards.

Balancing off an account

The balancing ledger accounts dot point shows how to close an account at the period end and carry the balance forward.

Posting transactions and balancing the bank account

step 1: post the opening capital

The owner pays $\text{S\textdollar}20{,}000$ into the business bank account as capital. Debit bank $\text{S\textdollar}20{,}000$ ; credit capital $\text{S\textdollar}20{,}000$ .

step 2: post the payments and receipts

The business pays rent $\text{S\textdollar}1{,}500$ by cheque (debit rent, credit bank $\text{S\textdollar}1{,}500$ ), receives $\text{S\textdollar}4{,}000$ from a cash sale paid into the bank (debit bank, credit sales $\text{S\textdollar}4{,}000$ ), and the owner withdraws $\text{S\textdollar}800$ by cheque (debit drawings, credit bank $\text{S\textdollar}800$ ).

step 3: total each side of the bank account

Debit side of bank: $\text{S\textdollar}20{,}000 + \text{S\textdollar}4{,}000 = \text{S\textdollar}24{,}000$ . Credit side of bank: $\text{S\textdollar}1{,}500 + \text{S\textdollar}800 = \text{S\textdollar}2{,}300$ .

step 4: balance off

Difference $= \text{S\textdollar}24{,}000 - \text{S\textdollar}2{,}300 = \text{S\textdollar}21{,}700$ . Enter balance c/d $\text{S\textdollar}21{,}700$ on the credit (smaller) side so both totals are $\text{S\textdollar}24{,}000$ , then bring down balance b/d $\text{S\textdollar}21{,}700$ on the debit side. A debit balance b/d confirms the bank is an asset of $\text{S\textdollar}21{,}700$ .

Check your knowledge

A mix of recall and posting questions across the module. Work each fully, then check against the solutions.

State, using DEAD CLIC, which side increases an asset and which side increases a liability. (2 marks)
Give the double entry for paying wages of $\text{S\textdollar}2{,}000$ by cheque. (2 marks)
Give the double entry for a credit sale of goods for $\text{S\textdollar}3{,}500$ to a customer. (2 marks)
Give the double entry for returns outwards of $\text{S\textdollar}400$ to a supplier. (2 marks)
A cash account has debit entries totalling $\text{S\textdollar}9{,}000$ and credit entries totalling $\text{S\textdollar}5{,}600$ . Calculate and describe the balance carried down. (3 marks)
Explain why the owner taking goods for personal use is recorded as drawings. (2 marks)

Solutions

Q1: An asset increases on the debit side (the A in DEAD). A liability increases on the credit side (the L in CLIC).
Q2: Debit wages $\text{S\textdollar}2{,}000$ (an expense increases); credit bank $\text{S\textdollar}2{,}000$ (an asset decreases).
Q3: Debit the customer / trade receivable $\text{S\textdollar}3{,}500$ (an asset increases); credit sales $\text{S\textdollar}3{,}500$ (income increases).
Q4: Debit the supplier / trade payable $\text{S\textdollar}400$ (the liability decreases); credit returns outwards $\text{S\textdollar}400$ .
Q5: Difference $= \text{S\textdollar}9{,}000 - \text{S\textdollar}5{,}600 = \text{S\textdollar}3{,}400$ . Enter balance c/d $\text{S\textdollar}3{,}400$ on the credit side; bring down balance b/d $\text{S\textdollar}3{,}400$ on the debit side. A debit balance b/d shows cash of $\text{S\textdollar}3{,}400$ held, an asset.
Q6: Under the business entity concept the owner is separate from the business, so goods taken for private use reduce the owner's claim. They are recorded as drawings (debit drawings, credit purchases), not as a sale or an expense.

Sources & how we know this

Principles of Accounts (Syllabus 7087) — Singapore Examinations and Assessment Board (2026)
Singapore-Cambridge GCE Ordinary Level (joint SEAB and Cambridge examination) — Singapore Examinations and Assessment Board / Cambridge Assessment International Education (2026)