Bookkeeping Basics
Debit and Credit
The left and right sides of every journal entry — the two directions a transaction can move an account's balance.
Debit means the left side of an account; credit means the right side. That's the entire literal meaning — they are positional labels, not value judgments. Which side increases the account depends on the account type: debits increase assets, expenses, and dividends; credits increase liabilities, equity, and revenue. The rule that governs everything is that total debits must equal total credits in every entry.
Debit and credit are what make double-entry bookkeeping work. A payment of $500 on a vendor bill is a debit to accounts payable (left side, reducing the liability) and a credit to cash (right side, reducing the asset) — both sides shrink, and the entry balances. Every mistake in manual bookkeeping is eventually a debit or credit posted to the wrong side or the wrong account, which is why trial balances exist to catch the sum mismatch early.
Example
You earn $4,000 in cash revenue: debit Cash $4,000 (asset up, left side), credit Revenue $4,000 (revenue up, right side). You pay $1,200 rent with cash: debit Rent Expense $1,200 (expense up), credit Cash $1,200 (asset down). Debits equal credits in both entries.
Common questions
Is credit good and debit bad?
No — that's a banking connotation that doesn't apply in bookkeeping. In accounting they're purely positional: debit is left, credit is right. A credit balance is good news in revenue accounts and bad news in expense accounts, and vice versa for debits.
How do I remember which accounts increase with a debit?
Use the equation: Assets = Liabilities + Equity. Debits increase the left side (assets) and credits increase the right side (liabilities and equity). Expenses and dividends reduce equity, so they follow the equity side's opposite — they increase with debits.
Practice this in the game
Accrual World turns concepts like these into playable drills. Pick the account, pick debit or credit, and get instant feedback. Free, no signup.
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