A debit is an entry on the left side of an account; a credit is an entry on the right side. In double-entry bookkeeping, every transaction consists of equal debits and credits — if 500 must be credited elsewhere.
Debits and credits don’t inherently mean “increase” or “decrease.” Their effect depends on the account type:
| Account type | Debit effect | Credit effect |
|---|---|---|
| Asset | Increase | Decrease |
| Liability | Decrease | Increase |
| Equity | Decrease | Increase |
| Revenue | Decrease | Increase |
| Expense | Increase | Decrease |
The terms derive from Latin: debere (to owe) and credere (to trust or believe). In Pacioli’s original formulation, a debit recorded what someone owed you and a credit recorded what you owed someone else [citation needed]. The modern usage is more abstract — debits and credits are simply the left and right sides of the accounting equation, and their meaning comes from context.
A common source of confusion: in everyday language, “credit” suggests receiving money (a credit to your bank account). In accounting, a credit to your cash account means cash decreased — because cash is an asset, and credits decrease assets. The bank’s perspective is the opposite of yours: your deposit is their liability, and crediting a liability increases it. Both sides use the same system correctly; the confusion arises from conflating the two perspectives.
Related terms
- Account — the record that debits and credits are posted to
- Double-entry bookkeeping — the system that requires equal debits and credits
- Journal — where debit and credit entries are first recorded
- Trial balance — the check that total debits equal total credits