debits

A debit, in accounting, is an entry recorded on the left side of a T-account as part of double-entry bookkeeping. Debits and credits are used to record every financial transaction in a balanced ledger, with the two sides accounting for increases and decreases in different account types.

The effect of a debit depends on the account type. Debits increase assets and expenses, and decrease liabilities, equity, and revenue. Conversely, credits increase liabilities, equity, and revenue, and decrease assets and expenses. Each transaction must have equal totals of debits and credits to keep the books in balance. Examples help illustrate this: purchasing equipment with cash involves a debit to Equipment and a credit to Cash; purchasing inventory on credit involves a debit to Inventory and a credit to Accounts Payable.

In banking and consumer finance, a debit refers to a transaction that reduces the balance of a bank account. Debit transactions are typically executed via a debit card or ATM withdrawal, drawing funds directly from the linked account rather than using credit. Debit activity is recorded as debits on the account statement, reflecting a decrease in cash or cash equivalents.

Debits are a fundamental element of double-entry accounting, guiding how transactions are recorded across accounts to maintain ledger accuracy. They are not inherently positive or negative; their impact depends on the nature of the account affected.