Read Along With the VideoTranscript
Let's do one more shortcut to normal. Trying to figure out here what the normal balance of an account is. So cash is normally a debit, meaning it's increased by debits. So this shortcut is just gonna be an acronym.
And that acronym is DEAD. DEAD stands for debits are expenses, assets, and dividends. Okay? So anytime you see an expense, an asset, or a dividend, you know that it needs to be debited. That didn't help you much with credits, does it? Well, let's see. If it's not an expense, an asset, or a dividend, it needs to be credited. Revenue.
Is it in the DEAD acronym? Expenses are, so we're gonna say it's not, which means it's a credit. Liabilities. Is it in here? Expense, asset, dividend? Nope. So it's a credit. Cash. Cash is an asset, so we're gonna say debit. So why is this not the first thing that I showed you? Why didn't I just show you this and say, "Great, this is all you need to know"? Because this tells you which accounts, for the most part, are gonna be debited. And you can figure out by exclusion which ones need to be credited. And that's pretty helpful, but that's not good enough. On the test or on the quiz or whatever it is, you're gonna need to have a deeper understanding than, well, expenses are debited.
That's super good to know, but that's just not enough. So I wanted to save this one for last so that you don't look at this and think, "Well, I don't need to learn anything else. I know these three things, so I can figure everything out." So this is a nice heuristic. It's a nice mnemonic. It's a nice thing to help you remember, but this isn't enough. So if you've just come to this video just so you can remember which ones are debits and you don't wanna learn anything else, you're gonna have a hard time. But this can be helpful if you know everything else.