Credit vs Debit ExplainedAre you stumped by the riddle of credit vs debit and what goes on each side? Don't worry, it happens to the best of us, especially with all these bookkeeping programs to do the thinking for us most of the time. So if you're stuck entering a manual journal entry and need to know what side to put the debit on and what side to put the credit on, here's how it goes. Double Entry Accounting The credit vs debit is the main principle behind double entry accounting which is used by almost every business and must be understood by every bookkeeper. But don't worry, once you understand a few small principles you'll be good to go.
What does debiting do? A debit increases your expense account and your asset account. A debit decreases your income account, your liability account and your equity account. What does crediting do? A credit decreases your expense account and your asset account. A credit increases your income account, liability account and equity accounts. Why does debiting increase some accounts (expense and assets) and decrease other accounts (liabilities, equity and income)? It helps to look at it like this. Expenses are debited because they debit (decrease) the equity (or net worth) of your company. Income is credited because it credits (increases) the equity (or net worth) of your company. To understand this even further, let's compare how the Income Statement and Balance Sheet work. Almost there, but need a little more to fully comprehend debit vs credit? Here are some examples of journal transactions to help you learn debit and credit and more fully grasp how to use them. Return from Credit vs Debit to Stress-Free-Bookkeeping HomePage
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