Accounting terms

Dictionary of all accounting terms





What is Debit?

Debit is used in accounting where either the assets are increased or the liabilities are decreased.  For most people, a debit shows up in their bank accounts as money having gone out, or an expense, while a credit represents money coming in.

Debits are used in double-entry accounting systems, where every business transaction involves two accounts. For example, if a company pays for advertisement, its Cash account will decrease, but its Advertising Expense will increase.

Debits are balanced by credits, as in the above example a debit was applied to the Cash account while a credit was applied to the Advertising Expense.

Another example could be when a company purchases a computer or other equipment. The accountant would debit the fixed assets while crediting the liabilities account.

When T-charts are used in bookkeeping, the debit is placed on the left side while the credit is on the right. The debits and credits are then used in a trial balance and adjusted trial balance to make sure that all the entries balance. In effect, the amount of all debits has to equal the amount of all credits.

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