Debits and Credits

What are Debits and Credits?

Debits and Credits are the fundamental building blocks in accounting used to record all financial transactions. They are integral to the double-entry bookkeeping system, ensuring that accounts are kept balanced and the accounting equation holds true.

Short Description: The foundational components used in accounting to record transactions in the double-entry bookkeeping system.

• Debits: An entry on the left side of an account ledger that increases assets or expenses and decreases liabilities or equity.
• Credits: An entry on the right side of an account ledger that increases liabilities, income, or equity and decreases assets or expenses.

In any financial transaction, debits and credits must be equal, which maintains the accuracy and integrity of financial records. This balance is crucial for analyzing a company's financial position and performance.