Debit and Credit

When is a debit and credit used?

Debit and Credit are terms used in They refer to entries made in accounts to reflect the transactions of a business. The terms are often abbreviated to Dr (Debit) and CR (Credit).

Do not try to read anything more into the terms other than debit means on the left hand side and credit means on the right hand side of the accounting equation.

What is a Debit?

  • Debit entries show something which comes into the business
  • Debits go on the left, and they either increase or decrease accounts depending on the type of account. This is shown in our Debit and Credit Chart for easy reference.
  • For every Debit there must be a Credit

What is a Credit?

  • Credit entries show something which went out of the business
  • Credits go on the right, and they either increase or decrease accounts depending on the type of account. This is shown in our Debit and Credit Chart for easy reference.
  • For every Credit there must be a Debit

At the end of an accounting period the net difference between an accounts debits and credits is the account balance which can either be a debit or a credit balance.

Return to the Small Business Accounting Course

Debit and Credit March 12th, 2017Team

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