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It is important to understand them because they are the base of the entire accounting system. There are instances where a type of sub-account will have a balance contrary to their normal balance. Examples of contra revenue accounts include Returns and Discounts. Alright so, let\u2019s say you successfully sold 10 yellow rain boots to a customer for \u200c$120. Here, because it was a sale, you would credit the transaction to a Revenue account. As you can see, Bob\u2019s equity account is credited (increased) and his vehicles account is debited (increased).<\/p>\n<\/p>\n
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We use this in the accrual method of double-entry accounting. We use these terms in the process of categorizing transactions and writing journal entries in a general ledger. This right-side, left-side idea stems from the accounting equation where debits always have to equal credits in order to balance the mathematically equation.<\/p>\n<\/p>\n