Debit vs. Credit in Accounting: Key Differences Explained
Debit = left side of every account; it increases assets and expenses while decreasing liabilities, equity, and revenue. Credit = right side; it does the opposite.
People mix them up because “credit” sounds like money you possess, yet in accounting it often means money you owe. The everyday banking “credit card” flips the ledger view, so our intuition collides with textbook rules.
Key Differences
Debits raise what you own or spend; credits raise what you owe or earn. Assets and expenses live on the debit side; liabilities, equity, and revenue on the credit side.
Examples and Daily Life
You buy coffee with a company card: debit Office Supplies $5, credit Bank $5. Your bank statement shows the same $5 as a credit because it left the bank’s cash account.
Does a debit always mean money out?
No. A debit to your Cash account means money in, because Cash is an asset that increases on the left side.
Why does a credit card feel like “free money”?
Because the bank records a liability (credit) on its books when it lets you spend; to you, it’s a short-term loan, not income.