What is a debit?
A debit is an accounting entry that, depending on the account type, increases some balances and decreases others. It is one side of the double-entry bookkeeping system: every debit must be offset by one or more credits so the books remain in balance. The traditional abbreviation for debit is “dr.”
How debits fit into double-entry accounting
– Double-entry principle: each transaction affects at least two accounts with total debits equaling total credits.
– Journal formatting: debits are normally listed first (top lines) and credits below; in T-accounts a debit is recorded on the left side and a credit on the right.
– Trial balance: the sum of all debit balances must equal the sum of all credit balances.
Normal (or “natural”) account balances
– Asset accounts (cash, inventory, equipment) and expense accounts normally carry debit balances. A debit entry increases these accounts; a credit entry decreases them.
– Liability accounts (loans, accounts payable), equity (owner’s capital), and revenue accounts normally carry credit balances. A debit entry reduces these accounts; a credit entry increases them.
– Some accounts are contra accounts (used to offset a related account). Their “normal” sign is the opposite of the related account. Example: Allowance for doubtful accounts is a contra-asset; a debit reduces the allowance (which increases net receivables).
Common special cases and terms
– Dangling debit: a debit balance that lacks a matching credit to clear it. It can indicate an error or an unusual item (e.g., prepaid asset or goodwill that isn’t yet offset).
– Debit note: a document issued between businesses to record adjustments such as returns, corrections, or amounts due after an initial invoice.
– Margin debit (margin accounts): when an investor borrows from a broker to buy securities, the amount owed to the broker appears as the debit balance in the margin account. The adjusted debit balance subtracts certain offsets (like profits on short sales or special miscellaneous account balances).
– Contra accounts: accounts that reduce or offset another account’s balance (e.g., accumulated depreciation reduces the asset’s net book value).
Quick checklist: deciding whether to debit or credit
1. Identify the accounts affected by the transaction.
2. Determine each account’s type (asset, liability, equity, revenue, expense, or contra).
3. Decide whether each account increases or decreases.
4. Apply the rule: debits increase assets/expenses and decrease liabilities/equity/revenue (and vice versa for credits), except for contra accounts which reverse the usual effect.
5. Ensure total debits = total credits before posting.
Worked numeric example (simple journal entries)
Scenario: A consulting firm receives $1,000 cash for services it performed, then pays $400 in utilities.
Step A — Cash receipt for services:
– Cash (asset) increases by $1,000 → Debit Cash $1,000
– Service Revenue (revenue) increases by $1,000 → Credit Service Revenue $1,000
Effect: Assets +$1,000; Equity (via revenue) +$1,000
Journal entry:
Dr Cash 1,000
Cr Service Revenue 1,000
Step B — Pay utilities with cash:
– Utilities Expense (expense) increases by $400 → Debit Utilities Expense $400
– Cash (asset) decreases by $400 → Credit Cash $400
Effect: Assets −$400; Equity (via expense) −$400
Journal entry:
Dr Utilities Expense 400
Cr Cash 400
Net position after both transactions:
– Cash = +1
Cash = +$600
Equity (net) = +$600
Explanation: The firm received $1,000 of cash and recognized $1,000 of revenue, which increased equity. It then paid $400 cash for utilities, an expense that reduces equity. Net effect: Assets (cash) increase by $1,000 then decrease by $400 → Cash = $600. Equity increases by $1,000 (revenue) then decreases by $400 (expense) → Net equity increase = $600. Assets and equity remain in balance: Assets +$600 = Equity +$600.
Quick ledger (T-account) view
– Cash: beginning 0 → +1,000 (receipt) → −400 (payment) = 600 balance (debit balance)
– Service Revenue: +1,000 (credit) = 1,000 credit balance
– Utilities Expense: +400 (debit) = 400 debit balance
Note: In double-entry bookkeeping every debit to one account is offset by a credit to another; totals of debits and credits for each journal entry are equal.
Rules of debits and credits (short reference)
– “Debit” means an entry on the left side of an account.
– Debits increase: Assets, Expenses, and Dividends/Withdrawals.
– Credits increase: Liabilities, Equity (capital), and Revenues.
– Conversely, debits decrease Liabilities/Equity/Revenues; credits decrease Assets/Expenses.
Mnemonic: DEAD CLIC — Debits increase Expenses, Assets, Dividends; Credits increase Liabilities, Income, Capital.
Checklist for recording a journal entry
1. Identify the accounts affected.
2. Classify each account (Asset, Liability, Equity, Revenue, Expense, Dividend).
3. Decide whether each account increases or decreases.
4. Apply debit/credit rule to each account from step 3.
5. Ensure total debits = total credits.
6. Record the journal entry with date and brief description.
7. Post amounts to ledger (T-accounts) and update balances.
8. Include entry in trial balance to confirm debits = credits.
Common mistakes to watch for
– Misclassifying an account (e.g., treating an expense as a liability).
– Forgetting that revenue increases equity (so revenue is credited when it increases).
– Recording unequal debits and credits — always check the arithmetic.
– Omitting the date or description — makes audits and reviews harder.
Worked numeric example — small walkthrough
Starting balances: all zero.
1) Perform services for cash $1,000:
– Cash increases → debit Cash 1,000
– Revenue increases → credit Service Revenue 1,000
Resulting balances: Cash (Debit) 1,000; Service Revenue (Credit) 1,000
2) Pay utilities $400 cash:
– Utilities Expense increases → debit Utilities Expense 400
– Cash decreases → credit Cash 400
Resulting balances: Cash (Debit) 600; Service Revenue (Credit) 1,000; Utilities Expense (Debit) 400
Trial balance check (debits vs credits): Debits = 600 + 400 = 1,000; Credits = 1,000 → balanced.
When to use debits in typical transactions (examples)
– Buy equipment for cash: debit Equipment (asset increases), credit Cash (asset decreases).
– Borrow from a bank: debit Cash (asset increases), credit Notes Payable (liability increases).
– Owner withdraws cash for personal use: debit Drawings/Dividends (reduces equity), credit Cash.
Assumptions and scope
– This explanation uses the standard rules of double-entry bookkeeping and accrual accounting used in most introductory accounting systems.
– Presentation assumes no beginning balances and no taxes or other adjustments.
Further reading (reputable sources)
– Investopedia — Debit Definition: https://www.investopedia.com/terms/d/debit.asp
– AccountingCoach — Debits and Credits: https://www.accountingcoach.com/debits-and-credits/explanation
– Khan Academy — Accounting: Debits and Credits: https://www.khanacademy.org/economics-finance-domain/core-finance/accounting-and-financial-statements
Educational disclaimer
This information is educational and not individualized investment, tax, or accounting advice. For specific accounting questions for your business or personal situation, consult a qualified accountant or financial professional.