Quick answer
A debit records an amount on the left side of an account; a credit records an amount on the right. Double-entry bookkeeping records every recognized transaction or adjustment with equal total debits and credits so the accounting equation stays balanced.
A transaction can increase one account and decrease another, or increase both. Debit and credit identify the recording sides; whether an amount increases or decreases a balance depends on the account’s class and normal balance.
A journal entry is the dated record that puts those account effects together for one recognized transaction or accounting event. It names the affected accounts, shows the debit and credit amounts, and keeps their totals equal.
Increases normal-debit accounts; decreases normal-credit accounts.
Increases normal-credit accounts; decreases normal-debit accounts.
Analyzing debits and credits
The account effects follow from what happened in the business:
- Describe the event. State what the business received, gave up, earned, incurred, borrowed, or repaid.
- Identify the affected accounts. Use account names, not only broad categories such as “asset.”
- Classify each account. Decide whether it is an asset, liability, equity, revenue, expense, or owner-distribution account.
- Decide whether each account increases or decreases. Keep this economic direction separate from debit and credit for the moment.
- Apply the normal-balance rule. An increase occurs on the normal side; a decrease occurs on the opposite side.
- Check completeness and accuracy. Total debits must equal total credits, and the chosen accounts, date, amount, and period must faithfully represent the event.
Receive $2,400 of supplies and agree to pay later
Maple Tech receives supplies now. The vendor invoice is payable in 30 days; no cash changes hands on the purchase date.
The supplies will be used in future operations, so they are initially an asset. Supplier credit creates an obligation rather than a cash payment.
- Supplies increases. It is an asset with a normal debit balance.
- Accounts Payable increases. It is a liability with a normal credit balance.
- Debit Supplies and credit Accounts Payable for the same amount.
Scroll horizontally to see all columns.
| Account | Debit | Credit |
|---|---|---|
| Supplies | 2,400 | |
| Accounts Payable | 2,400 |
Why the supplies entry balances
Scroll horizontally to see all columns.
| Statement | Account | Effect | Timing |
|---|---|---|---|
| Balance sheet | Supplies | Assets increase by $2,400 | Purchase date |
| Balance sheet | Accounts Payable | Liabilities increase by $2,400 | Purchase date |
| Income statement | Expense | No immediate effect while the supplies remain unused | Recognized as supplies are consumed |
- Balance sheet
- AccountSupplies
- EffectAssets increase by $2,400
- TimingPurchase date
- Balance sheet
- AccountAccounts Payable
- EffectLiabilities increase by $2,400
- TimingPurchase date
- Income statement
- AccountExpense
- EffectNo immediate effect while the supplies remain unused
- TimingRecognized as supplies are consumed
Apply the same steps to revenue, expenses, and payments
Scroll horizontally to see all columns.
| Transaction | Effect on each account | Entry |
|---|---|---|
| Pays $12,000 cash for equipment | Equipment (asset) increases; Cash (asset) decreases | Debit Equipment; credit Cash |
| Completes services for $6,000 cash | Cash increases; Service Revenue increases, raising equity | Debit Cash; credit Service Revenue |
| Pays $1,500 rent for March | Rent Expense increases, reducing equity; Cash decreases | Debit Rent Expense; credit Cash |
| Later pays the $2,400 supplier balance | Accounts Payable (liability) decreases; Cash decreases | Debit Accounts Payable; credit Cash |
The equipment purchase changes the mix of assets without changing their total. Revenue is credited because it increases equity; the expense is debited because it reduces equity. Paying the supplier debits Accounts Payable because a debit decreases its normal credit balance.
Compound journal entries
“Double-entry” means every recognized transaction or adjustment has balanced debit and credit effects. It does not mean every entry has exactly two lines. An entry involving more than two account lines is called a compound entry; it may debit or credit several accounts as long as the totals remain equal and each line represents part of the same event.
Pay part of an equipment purchase now
A separate business buys equipment for $12,000, pays $3,000 immediately, and owes the supplier $9,000. Equipment increases by the full cost. Cash decreases only by the down payment, and Accounts Payable records the unpaid amount. The $12,000 debit equals the two credits combined.
Scroll horizontally to see all columns.
| Account | Debit | Credit |
|---|---|---|
| Equipment | 12,000 | |
| Cash | 3,000 | |
| Accounts Payable | 9,000 |
Adjustments use the same logic
An adjustment is a later entry that updates the records for an amount earned, used, incurred, or otherwise changed during the period but not yet captured in day-to-day recording. Like any other entry, it identifies the affected accounts and keeps total debits equal to total credits. These period-end updates are explained in Adjusting Entries.
Balance and accounting correctness
Equal totals prove only arithmetic balance. An entry can balance while using the wrong account, recording the wrong amount on both sides, duplicating revenue, or placing the event in the wrong period. Always check whether the entry faithfully records what increased, what decreased, and why.
Common misconceptions
- “Debit means cash came in.” A cash receipt usually debits Cash, but many debits do not involve cash and a credit can also reduce Cash.
- “My bank credited me, so credit means increase.” A bank statement shifts to the bank’s perspective: every organization records its own accounts. For example, when your business deposits $500, its own books debit Cash $500. The bank records the same $500 as a credit to its liability to you because it owes the deposit back. Your deposit is therefore cash—an asset—from your perspective, but the bank’s obligation from its perspective.
- “If it balances, it is correct.” Balance does not validate the account choice, timing, measurement, or business purpose.