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Accounting encyclopedia · Bookkeeping

Debits and credits

Debits and credits are the left and right sides of an account in double-entry bookkeeping. A debit increases assets and expenses and decreases liabilities, equity and revenue. A credit does the opposite. The words do not mean good or bad, or add or subtract. Their meaning depends on the type of account.

Sora Accounting & Tax · General information · Editorial policy
Updated · 2 min read

Debit and credit raise different kinds of account

A debit increases assets and expenses while a credit increases liabilities, equity and revenue; a bank statement reads from the bank’s side.

Visual labels: Debit: assets, expenses; Credit: liabilities, sales; Banks read it reversed.

The rule for each account type

Five account types matter. Assets and expenses normally carry debit balances, so a debit increases them. Liabilities, equity and revenue normally carry credit balances, so a credit increases them. The opposite side reduces the balance.

That is why cash can be debited while revenue is credited when a customer pays. Both balances rise, each on its own natural side. The journal entry page shows how these lines are grouped into a complete entry.

An illustrative example

A business invoices a customer $500 for work. Accounts receivable is debited $500 and revenue is credited $500. Two weeks later the customer pays. Cash is debited $500 and accounts receivable is credited $500, which removes the amount owed.

Now the business receives a $200 supplier bill for materials it has not yet paid. Materials expense is debited $200 and accounts payable is credited $200. When the bill is paid, accounts payable is debited and cash is credited. The figures are round and ignore sales tax.

Why the bank seems to say the opposite

Your bank describes your account from its own point of view. Money you deposit is a liability to the bank, so the bank credits it. In your books the same cash is an asset, so you debit it. Neither is wrong, but mixing the two viewpoints is a common source of confusion.

Another common mistake is treating a credit as a good thing. A credit to an expense account reduces the expense, and a debit to revenue reduces revenue, as with a refund.

What to discuss with your accountant

Most people using accounting software never post a debit or credit by hand. It still helps to recognize the pattern when reading a ledger, a manual adjustment or a correction your bookkeeper explains.

Ask which manual entries are made each month and why, and who reviews them. Keep the invoice, statement or calculation that supports each unusual entry. For the wider system these sides belong to, see double-entry bookkeeping.

Sources & editorial notes

Sources checked October 24, 2026. The examples are illustrative and provide general information. Discuss how the guidance applies to your circumstances with your accountant.

Rules and guidance can change. Use the current official source and confirm the treatment for your facts. To flag an error, contact Sora.