Why is revenue a credit?

Why is revenue a credit?

In bookkeeping, revenues are credits because revenues cause owner’s equity or stockholders’ equity to increase. Recall that the accounting equation, Assets = Liabilities + Owner’s Equity, must always be in balance.

Can revenue be a debit?

Revenues can be debited for a number of reasons. Often accountants choose to record an overall revenue with these debits as individual line items to separately record returns, allowances or sales discounts over a given period.

Is a revenue an asset?

For accounting purposes, revenue is recorded on the income statement rather than on the balance sheet with other assets. Revenue is used to invest in other assets, pay off liabilities, and pay dividends to shareholders. Therefore, revenue itself is not an asset.

How is revenue recorded?

Revenues earned from a company’s operations must be recorded in the general ledger, then reported on an income statement every reporting period.