How can you distinguish if it is a debit or a credit?
submitted by kaye

dban

If money is going into your account, it's a debit. If money is leaving your account, it's a credit.

James

It's the opposite of what the bank tells you. When the bank gives you a "credit," it's a credit on their account. On your account it's actually a debit.

consumer_of_grapes

There's not one quick answer to this, because it depends on what account you're talking about. That's why it's hard to figure our debits and credits.

Here's the key to understanding debits vs. credits: Start with the accounting equation. Assets = Liabilities + Equities. Everything on the left side of the equation (assets like cash or inventory) normally carries a debit balance, so when it increases you debit the account. Everything on the right side of the equation (liabilities and equity) normally has a credit balance. When they increase, you credit those accounts.

If it increases an asset or expense, you're likely looking at a debit. If it increases a liability, equity, or revenue, it's probably a credit.

schmedrik

If you remember the T-account method, you can use that as a visual aid. Everything on the left side is a debit, and everything on the right is a credit. If a company takes out a loan, cash (an asset) increases, so you debit cash. The loan payable (a liability) also increases, so you credit that account.

It's understandable that people get confused about this, because the terms are contradictory. In the example of taking out a loan, your cash increases and your accounts payable increases. They're both going up, but it's called a different thing when they go up. It's confusing for sure.

dave

With assets and expenses, increases are recorded as debits because they add value or cost to the company. They go on the left side. When these accounts decrease, like paying off a debt or reducing expenses, you credit them. So, on the left side debit is an increase and credit is a decrease.

For liabilities, equities, and revenue, it’s the opposite. Increases are called credits and decreases are called debits

Debit does not always mean increase, and credit does not always mean decrease. You have to identify whether it goes on the left side of the balance sheet or the right side.

Sorry, I didn't invent the rules. I just work here.