Debits and Credits

What are Debits and Credits?

Debits and credits are the fundamental building blocks of double-entry bookkeeping. A debit entry increases asset or expense accounts, while a credit entry increases liability, equity, or revenue accounts.

Example of Debits and Credits

If a company purchases office supplies for $500, it would debit the office supplies account and credit the cash account.

How To Calculate Debits and Credits

Every financial transaction affects at least two accounts. Use the accounting equation (Assets = Liabilities + Equity) to ensure transactions are balanced. 

  • Special Tip Always ensure that the total debits equal the total credits for every transaction to maintain balanced books.

  • Advantages 
    • Provides a clear and accurate financial picture. 
    • Helps in detecting and preventing errors. 
    • Essential for preparing financial statements. 
  • Disadvantages 
    • Can be complex and time-consuming. 
    • Requires thorough understanding and accuracy.


What is the difference between a debit and a credit?

A debit increases assets or expenses, while a credit increases liabilities, equity, or revenues.

Yes, most accounts will have both, but the balance will be either a debit or a credit.

They ensure the accuracy and integrity of financial records.

They affect the values of assets, liabilities, and equity, ensuring the accounting equation stays balanced.


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