Debit and Credit

Definition

Debit and credit describe the two sides of an account, and how a transaction is recorded in the accounting system.

• Debit (Dr): the left side
• Credit (Cr): the right side

Double-Entry Rule

Every transaction affects at least two accounts. Total debits must always equal total credits, which keeps the accounting equation in balance.

Rules of Debit and Credit

Move Expense to the left side of the equation. Elements on the left increase with a Dr (left side). Elements on the right increase with a Cr (right side).

$$\underbrace{\text{Assets} + \text{Expense}}_{\text{Dr}\,\uparrow \quad \text{Cr}\,\downarrow} \;=\; \underbrace{\text{Liabilities} + \text{Equity} + \text{Income}}_{\text{Cr}\,\uparrow \quad \text{Dr}\,\downarrow}$$

Element	Debit (Dr)	Credit (Cr)	Normal balance
Assets	Increase	Decrease	Debit
Expenses	Increase	Decrease	Debit
Equity	Decrease	Increase	Credit
Income (Revenue)	Decrease	Increase	Credit
Liabilities	Decrease	Increase	Credit

• Assets & Expenses: increase with a debit, decrease with a credit.
• Liabilities, Equity & Income: increase with a credit, decrease with a debit.
• The normal balance of an account is the side it increases on.