Debits are always on the left side of the entry, while credits are always on the right side, and your debits and credits should always equal each other in order for your accounts to remain in balance.įor instance, if we were to record a $250 payment received on account from a customer, the journal entry for debits and credits would look like this:Īssets: Assets are things you own such as cash, accounts receivable, bank accounts, furniture, and computers In double-entry accounting, any transaction recorded involves at least two accounts, with one account debited while the other is credited. You may even be wondering why they’re even necessary.ĭebits and credits are used to ensure that you’re adhering to the accounting equation, which is:
What are debits and credits?Īs a business owner, you may find yourself struggling with when to use a debit and credit in accounting. This is particularly important for bookkeepers and accountants using double-entry accounting.ĭebits and credits are the true backbone of accounting, as any transaction recorded in a ledger, whether it’s hand-written or in your accounting software, needs to have a debit entry and a credit entry.īut how do you know when to debit an account, and when to credit an account? The following basic accounting rules will guide you. We’ll help guide you through the process, and give you a handy reference chart to use.ĭebits and credits are two of the most important accounting terms you need to understand. If you’re using double-entry accounting, you need to know when to debit and when to credit your accounts.
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