Debits and Credits

Transactions have to go somewhere and, while we don't expect anyone other than accountants to get excited about debits and credits, it's a good idea to understand the basics behind these entries.

Debits will either increase an asset or expense account or decrease a liability or equity account.

Credits will either increase a liability or equity account or decrease an asset or expense account.

There are a couple of things that always remain true in the case of accounting concerning debits and credits:

  • There must always be at least two accounts (there can be more).
  • The amounts must match so that they balance each other.

What to remember: There, of course, is a lot more depth to this topic, so there's no need to try and become an expert, but understanding these basic concepts will help to keep things organized and make conversations with the accountant a little easier.