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1Fix the driver behind crashes, sound loss and screen glitches2Clear out junk files and repair common Windows errors3Scan for outdated or missing drivers - takes under a minuteIn accounting, a debit is an entry on the left side of an account and a credit is an entry on its right side. Neither word automatically means an increase or decrease: the account type determines the effect. In double-entry bookkeeping, each transaction records equal total debits and credits, helping preserve the equation Assets = Liabilities + Equity.
What debit and credit mean
Picture an account as a two-sided record: debit entries go on the left, and credit entries go on the right. A transaction affects at least two accounts, with one or more entries on each side. The dollar total debited must equal the dollar total credited.
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To decide which side to use, first identify the account and whether it is increasing or decreasing. Then apply the normal balance for that kind of account. A debit is not universally “money in,” and a credit is not universally “money out.”
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Which side increases each account type?
These are the usual patterns for introductory accounting. The “normal balance” is the side on which the account typically carries its balance.
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| Account type | Normally increases with | Normal balance |
|---|---|---|
| Assets | Debit | Debit |
| Expenses | Debit | Debit |
| Dividends or owner distributions | Debit | Debit |
| Liabilities | Credit | Credit |
| Equity, including common stock or owner’s capital | Credit | Credit |
| Revenue | Credit | Credit |
When an account decreases, the entry is generally on the side opposite its normal balance. For example, crediting Cash decreases this asset; debiting a liability decreases that liability. These conventions describe bookkeeping mechanics, not whether a transaction is favorable or unfavorable.
Contra-accounts are an important exception
A contra-account is paired with a related account but has the opposite normal balance, reducing the reported amount of that account. Accumulated depreciation, for example, is a contra-asset with a credit normal balance. A simple “assets increase with debits” mnemonic does not describe every account classified alongside assets.
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How to work out a journal entry
- Name the accounts. Identify every account affected by the transaction, such as Cash, Rent Expense, or Notes Payable.
- Classify each account. Determine whether each is an asset, liability, equity, revenue, expense, or another account type.
- Determine what changes. Decide whether each account increases or decreases.
- Choose the side. Use the account’s normal balance: an increase is usually recorded on that side; a decrease on the other side.
- Check the totals. Add the debit amounts and credit amounts. They must be equal for the transaction.
Examples of balanced entries
Each example shows the accounts, their effects, and equal debit and credit amounts. The amounts are illustrative; the accounting mechanics do not depend on a particular dollar value.
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| Account | Type and effect | Entry |
|---|---|---|
| Cash | Asset increases | Debit |
| Owner’s Capital or Common Stock | Equity increases | Credit |
The cash debit equals the capital or stock credit. Assets and equity both rise, so the accounting equation remains balanced.
Business pays rent in cash
| Account | Type and effect | Entry |
|---|---|---|
| Rent Expense | Expense increases | Debit |
| Cash | Asset decreases | Credit |
The rent expense debit equals the cash credit. The credit does not mean that a credit always represents an outflow; here it decreases an asset whose normal balance is debit.
Business buys equipment for cash
| Account | Type and effect | Entry |
|---|---|---|
| Equipment | Asset increases | Debit |
| Cash | Asset decreases | Credit |
One asset rises while another falls. The equipment debit and cash credit are equal, so the total assets do not change at the moment of purchase.
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Business earns service revenue in cash
| Account | Type and effect | Entry |
|---|---|---|
| Cash | Asset increases | Debit |
| Service Revenue | Revenue increases | Credit |
The cash debit equals the revenue credit. Cash increases on the debit side, while revenue increases on the credit side.
Business borrows cash
| Account | Type and effect | Entry |
|---|---|---|
| Cash | Asset increases | Debit |
| Notes Payable | Liability increases | Credit |
The cash debit equals the notes-payable credit. The business has more cash and an equal new liability.
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Why debits and credits must balance
Double-entry bookkeeping records both sides of a transaction so the accounting equation—Assets = Liabilities + Equity—continues to hold. For example, borrowing increases assets and liabilities by the same amount; paying rent reduces cash while recognizing an expense that reduces equity.
Equal totals are an arithmetic requirement, not a guarantee that the books are right. A transaction can be recorded in the wrong account while debits still equal credits. An omitted transaction or equal offsetting mistakes can also leave totals balanced. An account with an unexpected balance can be a clue to an unusual transaction or a possible error, but it is not proof by itself.
What a trial balance can—and cannot—tell you
A trial balance lists ledger account balances and checks whether debit balances total the same amount as credit balances. If the totals differ, there is an arithmetic or posting problem to investigate. If they match, that confirms only that the listed balances add up under the debit-credit system; it does not establish that every transaction was recorded, classified, or measured correctly.
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Why a bank statement may use the words differently
A bank statement reflects the bank’s books, not the customer’s own ledger. Because the customer’s cash is an asset in their records but a liability for the bank, a bank’s debit or credit label can appear opposite to the entry in the customer’s Cash account. For personal or business bookkeeping, determine the account and whose records you are reading before interpreting the label.
Further learning
For a fuller introduction and practice with financial accounting, see OpenStax Principles of Accounting, Volume 1: Financial Accounting, section 3.1. For the accounting equation’s connection to double-entry bookkeeping, see OpenStax Principles of Finance 2e, section 4.2.
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