Debit in Accounting vs. Credit in Accounting — What's the Difference?
Edited by Tayyaba Rehman — By Fiza Rafique — Published on December 12, 2023
In accounting, a debit increases asset and expense accounts, while a credit decreases them; conversely, a debit decreases liability, equity, and revenue accounts, while a credit increases them.
Difference Between Debit in Accounting and Credit in Accounting
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Key Differences
Debit in Accounting typically represents an increase in assets or expenses, while Credit in Accounting typically indicates a decrease in those accounts. For example, when a business buys inventory, it debits its inventory account.
In contrast, Debit in Accounting decreases liability, equity, and revenue accounts, while Credit in Accounting increases them. For instance, when a business earns revenue, it credits its revenue account.
The origin of the terms Debit in Accounting and Credit in Accounting comes from Latin. "Debit" originates from "debere," meaning "to owe," while "Credit" originates from "credere," meaning "to trust."
The fundamental principle of accounting requires that for every Debit in Accounting, there is an equal and opposite Credit in Accounting. This ensures that the accounting equation remains balanced.
Both Debit in Accounting and Credit in Accounting are essential for recording transactions. They work together to maintain the integrity of the financial statements. A transaction might involve both a debit to one account and a credit to another.
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Comparison Chart
Accounting Impact
Increases assets & expenses
Increases liabilities, equity & revenue
Representation
Left side of the T-account
Right side of the T-account
Origin
From Latin "debere" (to owe)
From Latin "credere" (to trust)
Balance Impact
Decreases when negative
Decreases when negative
Example Transaction
Buying inventory
Earning revenue
Compare with Definitions
Debit in Accounting
Always paired with a corresponding credit in a transaction.
The company debited accounts receivable and credited revenue for a sale on credit.
Credit in Accounting
Denotes a decrease in assets or expenses.
The machinery account was credited when it was sold.
Debit in Accounting
Represents an increase in assets or expenses.
We debited the supplies account when we bought new office supplies.
Credit in Accounting
Always paired with a corresponding debit in a transaction.
The company credited accounts payable and debited expenses for a purchase on credit.
Debit in Accounting
Comes from the Latin word "debere," meaning to owe.
The loan payment was debited from the bank account.
Credit in Accounting
An entry made on the right side of an account.
The company credited the revenue account when it made a sale.
Debit in Accounting
Denotes a decrease in liabilities, equity, or revenue.
We debited the unearned revenue account when we provided the services.
Credit in Accounting
Represents an increase in liabilities, equity, or revenue.
The bank credited our loan account when we took out a new loan.
Debit in Accounting
An entry made on the left side of an account.
The company debited the cash account when it received money.
Credit in Accounting
Comes from the Latin word "credere," meaning to trust.
The vendor credited our account when they refunded our money.
Common Curiosities
What does a Credit in Accounting typically indicate?
A credit typically indicates an increase in liabilities, equity, or revenue.
How does a Debit in Accounting affect revenue accounts?
A debit decreases revenue accounts.
When I purchase equipment for my business, do I Debit in Accounting or Credit in Accounting the equipment account?
You debit the equipment account.
What does a Debit in Accounting typically represent?
A debit usually represents an increase in assets or expenses.
How does a Credit in Accounting affect expense accounts?
A credit decreases expense accounts.
If my business earns revenue, do I Debit in Accounting or Credit in Accounting the revenue account?
You credit the revenue account.
If I receive a loan, which action is correct, Debit in Accounting or Credit in Accounting?
You credit the liability account for the loan.
Where did the terms Debit in Accounting and Credit in Accounting originate?
They come from Latin; "debit" from "debere" (to owe) and "credit" from "credere" (to trust).
In a T-account, which side represents Credit in Accounting?
The right side represents credit.
In a T-account, which side represents Debit in Accounting?
The left side represents debit.
How does a Credit in Accounting affect asset accounts?
A credit decreases asset accounts.
Can a single transaction have both Debit in Accounting and Credit in Accounting?
Yes, every transaction in double-entry accounting has both a debit and a credit.
In general, do asset accounts have a Debit in Accounting or Credit in Accounting balance?
Asset accounts typically have a debit balance.
How does a Debit in Accounting affect equity accounts?
A debit decreases equity accounts.
How do Debit in Accounting and Credit in Accounting ensure the accounting equation remains balanced?
They work together in double-entry accounting to ensure every transaction affects at least two accounts, keeping the equation balanced.
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Written by
Fiza RafiqueFiza Rafique is a skilled content writer at AskDifference.com, where she meticulously refines and enhances written pieces. Drawing from her vast editorial expertise, Fiza ensures clarity, accuracy, and precision in every article. Passionate about language, she continually seeks to elevate the quality of content for readers worldwide.
Edited by
Tayyaba RehmanTayyaba Rehman is a distinguished writer, currently serving as a primary contributor to askdifference.com. As a researcher in semantics and etymology, Tayyaba's passion for the complexity of languages and their distinctions has found a perfect home on the platform. Tayyaba delves into the intricacies of language, distinguishing between commonly confused words and phrases, thereby providing clarity for readers worldwide.
