A debit is an accounting entry that raises assets or expenses, or lowers liabilities, equity or revenue. Recorded on the left side of a ledger account and abbreviated as ‘Dr’, debits and credits are the basis of double-entry bookkeeping and financial accounting.
What does a debit mean in accounting?
A debit is an accounting entry that results in either an increase in assets or a decrease in liabilities on a company’s balance sheet. It’s one half of every transaction in double-entry accounting.
A debit raises the value of an asset account or expense account. It lowers the value of a liability account, equity account or revenue account.
What’s the difference between debits and credits?
Debits and credits are used in double-entry bookkeeping to capture changes in value from business transactions. A debit is recorded on the left side of the ledger or T-account, and a credit appears on the right side.
A credit does the opposite – it increases liabilities, equity and revenue while decreasing assets and expenses.
Here’s how a debit or credit entry plays a part for each account’s normal balances:
| Account type | Debit | Credit |
|---|---|---|
| Asset account | Increase | Decrease |
| Expense account | Increase | Decrease |
| Liability account | Decrease | Increase |
| Equity account | Decrease | Increase |
| Revenue account | Decrease | Increase |
Assets and expenses have natural debit balances. Liabilities, equity and revenue accounts have natural credit balances. A debit increases an expense account in the income statement, while a credit decreases it.
How do debits relate to the accounting equation?
The accounting equation states that assets equal liabilities plus equity. Debits and credits are used to keep this balance across every transaction. Debits sit on the left-hand side of each account.
Expanded, the equation is:
Assets = Liabilities + Owner’s equity + (Revenue – Expenses).
The total dollar amount of all debits must equal the total dollar amount of all credits.
How do you record a debit in a journal entry?
Every transaction has an effect on at least two accounts – one account is debited, and another is credited. These two accounts can be different accounts of any type. In a standard journal entry, all debits are placed on the top lines, with credits listed underneath.
As an example, let’s say a business buys $10,000 of inventory on credit. Inventory (an asset account) gets a debit entry of $10,000. Accounts payable (a liability account, showing what the business owes) gets a corresponding credit of $10,000 until payment is made.
| Date | Account | Debit | Credit |
|---|---|---|---|
| 01/12/2026 | Inventory | $10,000 | |
| Accounts Payable | $10,000 |
The debit side and credit side have to balance. When journal entries are accurately recorded, you can extract a trial balance, balance sheet, financial statement, and cash flow statement.
What are the main types of debit accounts?
These are the main types of accounts that relate to debit:
- Asset accounts: Including the cash account, bank account, accounts receivable account and debit card account. These are real accounts that carry balances between periods.
- Expense accounts: Such as a sales account, wages or rent recorded in the income account on the income statement. They are nominal accounts (aka temporary accounts).
- Contra accounts: Like accumulated depreciation and doubtful accounts, which reduce a related asset for valuation purposes.
- Sales returns and sales discounts: Contra accounts that offset the sales account and revenue accounts.
The capital account and other accounts like equity normally hold a credit balance instead. When a debit is applied to a liability account, the account balance decreases. When a company provides a service to a customer who doesn’t pay straight away, it records an increase in assets with a debit to the accounts receivable account.
What does a debit mean on a bank statement?
On a personal bank statement, a debit means money is leaving the account. A debit reduces the balance of a bank account, which means money is moving out.
This can feel confusing, but consider this from the bank’s perspective. Your bank account is a liability to the bank — the bank owes you that money. So bank debits reduce the bank’s liability, while bank credits like customer deposits and interest income increase it.
It’s why bank records might seem reversed compared to your own books. Your deposit is an asset on your side, but the bank’s liability on theirs.
What is a debit note?
It’s a document that proves a company has created a legitimate debit entry in a B2B transaction. You’ll see it all the time in accounts payable and accounts receivable dealings between businesses.
A debit note formally records that the buyer’s account has been debited, and it supports the corresponding credit on the other party’s books.
What is a dangling debit?
This is a debit balance with no offsetting credit balance that would allow it to be written off. It sits on the balance sheet without a natural resolution.
Dangling debits appear when a business purchases goodwill while acquiring another company. They should be monitored well so they don’t distort the company’s books or create negative balances.
How do you manage debits and credits?
The double entry system prevents mistakes by requiring that every debit must have a corresponding credit within every accounting period.
We recommend that you use accounting software to record debits and credits automatically across your general ledger. A good accounting system will flag whenever debits don’t line up with credits, which helps SMBs stay on top of their finances.
See related terms
What is an expense?
What are fixed assets?
What is a balance sheet?
