Financial Glossary
Debit vs. Credit (Journal Entry)
In a journal entry, debits and credits are the two sides of every transaction recorded under double-entry bookkeeping, and the total debits must always equal the total credits. Debits increase asset and expense accounts and decrease liability, equity, and revenue accounts; credits do the opposite. Each transaction is entered with at least one debit and one credit so that the books, and the underlying accounting equation, stay in balance.
Problem & Application
For owners reviewing their own books or a bookkeeper's work, knowing which side an entry should hit is what lets you catch miscoded transactions, such as an expense recorded as a credit or a deposit booked to the wrong account. Misapplied debits and credits are a leading cause of out-of-balance financials and misstated profit, which then ripple into tax filings and lender reporting. Understanding the logic also makes it far easier to read and trust the general ledger behind the financial statements.
In Short
Debits and credits are the grammar of double-entry bookkeeping, and every accurate journal entry depends on applying them correctly. Mastering the basic rules is the foundation of trustworthy financial records.