Debits & Credits Cheat Sheet
The DEALER rule, normal balances, and the key ratio formulas — print it or keep it open while you study.
The DEALER rule
Dividends, Expenses, Assets increase with a Debit. Liabilities, Equity, Revenue increase with a Credit. Every entry's debits must equal its credits.
| Account type | Normal balance | Increase | Decrease |
|---|---|---|---|
| Assets | Debit | Debit | Credit |
| Expenses | Debit | Debit | Credit |
| Dividends | Debit | Debit | Credit |
| Liabilities | Credit | Credit | Debit |
| Equity | Credit | Credit | Debit |
| Revenue | Credit | Credit | Debit |
Key formulas
The Accounting Equation
Assets = Liabilities + Shareholders' Equity
Current Ratio
Current Ratio = Current Assets / Current Liabilities
Quick Ratio (Acid-Test)
Quick Ratio = (Current Assets - Inventory) / Current Liabilities
Debt-to-Equity Ratio
Debt-to-Equity Ratio = Total Liabilities / Shareholders' Equity
Gross Profit Margin
Gross Profit Margin = (Revenue - Cost of Goods Sold) / Revenue × 100
Net Profit Margin
Net Profit Margin = Net Income / Revenue × 100
Return on Equity (ROE)
ROE = Net Income / Shareholders' Equity × 100
Return on Assets (ROA)
ROA = Net Income / Total Assets × 100
Inventory Turnover
Inventory Turnover = Cost of Goods Sold / Average Inventory
Earnings Per Share (EPS)
EPS = (Net Income - Preferred Dividends) / Weighted Average Common Shares Outstanding