What is the difference between Debits and Credits in Accounting?

Question

In Accounting how do you know when to Debit something and when to credit something?

I'm in an accounting class right now, but for one reason or another (partly my fault, partly the professor) the basics just aren't sticking

Answer 1

the basic accounting equation is Assets = Liabilities + Owners Equity (A=L+OE). Within the OE category you have Expenses and Revenues, so A=L+(Revenues-Expenses).

Assets are increased using a debit (hard concept since we all use debit cards but you just have to accept it) and decreased using credits.

Liabilities are increased using a credit and decreased using a debit.

Expenses are increased using a debit and decreased using a credit.

Revenues are increased using a credit and decreased using a debit.

Accounting is tough and if you are seriously trying to learn it, I would take a class at your local community college. I recently took a small business accounting class and it was a great brush up on college classes that I took. Good luck.

Answer 2

You can debit and/or credit any account so it's difficult to think of it in terms of earning or spending money, increasing or decreasing. Furthermore, every transaction has a debit and an equal credit (double-entry accounting).

In accounting, basically, debit means LEFT and credit means RIGHT. I think it makes more sense when you know what the natural balance of a particular account is then it is more logical to identify the affect of a debit or credit on those accounts. For ex. liabilities have a natural credit balance, therefore a credit will increase the value of that account, wherease a debit will decrease the value. Conversely, an Expense account has a natural debit balance, so a debit will increase the account and a credit will decrease it. If you know T-Accounts those may be helpful for you. Every accountants mantra: Debits on the left, credits on the right :)

Oh accounting is so confusing, too much to explain in this little box. If I can be of further service, please let me know!!

Answer 3

Debit and credit is not a good thing or a bad thing. It's just a way to increase the balance of an account or decrease the balance. think of Debit as the left side and credit the right side. you debit or credit an account base on its classification (asset, liability, equity ect.) and whether you want to increase it or decrease the account.
to increase an asset acc. you debit the account.
to decrease an asset acc. you credit the account.
to increase a liability account you credit the account.
to decrease a liability account you credit the account.
to determine which account to debit or credit ask yourself "what do i want to happen to the account increase or decrease. and them follow the rule for increasing certain type of account such as asset or liability account.

Answer 4

Debits - Increase in cash, Asset accounts, inventory.
Decreases in liability

Credit - Increases in liabilities and expenses,
Decreases in cash, and inventory.

Its way more detailed than this and you really need a text book for detailed explanations, but these are just some basics.

Answer 5

it all depends on which kind of acc it is and where it normally holds it balance. Get a book to long to explain

Answer 6

debits are when you spend the money and credits are when you earn money.