What are debits and credits?

Debits and credits are the two sides of every accounting entry in double-entry bookkeeping. Debits increase asset and expense accounts while decreasing liability, equity, and revenue accounts. Credits do the opposite. Every transaction requires equal debits and credits to keep the accounting equation balanced. This system has governed bookkeeping for over 500 years.

The logic behind the rules

Assets appear on the left side of the accounting equation, so increases are recorded on the left (debit). Liabilities and equity sit on the right, so increases go on the right (credit). Revenue increases equity, so it takes credits. Expenses decrease equity, so they take debits. Once you understand the equation, the rules follow logically.

Common entry patterns

Cash receipt: debit cash, credit revenue, or accounts receivable. Bill payment: debit expense or accounts payable, credit cash. Payroll: debit wage expense, credit cash, and payroll liabilities. Depreciation: debit depreciation expense, credit accumulated depreciation. Learn the common patterns, and most day-to-day entries become routine.