Ask a room of accounting students what confuses them most and "debits and credits" wins every time. The confusion usually comes from trying to attach meaning to the words — debit sounds bad, credit sounds good. Bank statements make it worse by using the terms from the bank's perspective, not yours.
Here's the truth that makes everything simpler: debit means left, credit means right. Nothing more.
The one rule
Every account is a T-shape with a left side and a right side. Whether the left side means "increase" or "decrease" depends only on the account's type:
| Account type | Increases on | Decreases on | Normal balance |
|---|---|---|---|
| Assets | Debit (left) | Credit (right) | Debit |
| Expenses | Debit (left) | Credit (right) | Debit |
| Drawings / Dividends | Debit (left) | Credit (right) | Debit |
| Liabilities | Credit (right) | Debit (left) | Credit |
| Equity / Capital | Credit (right) | Debit (left) | Credit |
| Revenue | Credit (right) | Debit (left) | Credit |
The DEALER mnemonic
To remember which side increases each account:
Dividends (drawings), Expenses, Assets — increase with Debits.
Liabilities, Equity, Revenue — increase with Credits.
DEA | LER. The first three grow on the left; the last three grow on the right.
Why is it arranged this way?
It's not arbitrary — it follows directly from the accounting equation:
Assets = Liabilities + Equity
Assets sit on the left of the equation, so they grow on the left (debit). Liabilities and equity sit on the right, so they grow on the right (credit). Revenue grows equity → credit. Expenses and drawings shrink equity → they behave the opposite way, growing on the debit side. Once you see this, there is nothing left to memorise — the whole table is one equation wearing six hats.
Walk through it: three transactions
1. Buy supplies for $500 cash
Supplies (asset) increases → debit Supplies 500. Cash (asset) decreases → credit Cash 500. Two asset accounts, one up, one down — the equation stays balanced.
2. Borrow $10,000 from the bank
Cash increases → debit Cash 10,000. Bank Loan (liability) increases → credit Bank Loan 10,000. Both sides of the equation rise by the same amount.
3. Pay $800 electricity bill
Utilities Expense increases → debit Utilities Expense 800. Cash decreases → credit Cash 800. The expense will reduce equity when income is closed out — which is exactly why expenses live on the debit side.
Why every entry needs two sides
Notice what happened in all three examples above: nothing was ever recorded once. Buying supplies touched Supplies and Cash. Borrowing touched Cash and Bank Loan. That is double entry, and it is not bookkeeping ceremony — it falls out of the accounting equation being an equation. If you change one side, something else has to move to keep it true.
This is why the two golden checks work:
- Every transaction has at least one debit and at least one credit. If you have written an entry with only one line, you have not finished it.
- Total debits equal total credits. Not per account — across the whole entry, and across the whole ledger.
An entry can have more than two lines. Paying a $1,200 invoice that had a $200 discount is three lines: debit Accounts Payable 1,200, credit Cash 1,000, credit Purchase Discounts 200. One debit, two credits, and the totals still agree. Entries like this are called compound entries, and they are the norm in practice rather than the exception.
Two more transactions worth walking through
4. Sell goods for $3,000 on credit
Nothing has been received yet, but the sale is earned. Accounts Receivable (asset) increases, so debit Accounts Receivable 3,000. Revenue increases, and revenue grows on the right, so credit Sales Revenue 3,000.
The instinct to wait for the cash is the single most common error in this topic. The debit here is a promise to be paid, not money — and a promise you can enforce is an asset.
5. The customer pays a month later
Now the cash arrives: debit Cash 3,000. But revenue is not credited again — it was already recognised when the sale was made. What is being settled is the receivable, so credit Accounts Receivable 3,000.
Run the two entries together and the receivable nets to zero, cash is up 3,000, and revenue was counted exactly once. Credit revenue twice and you have inflated the year's sales with a single collection.
From journal to ledger: where the sides actually live
A journal entry is the instruction; the ledger is where it lands. Posting means copying each line into its own T-account — debits to the left column, credits to the right — and every account then carries a running balance on whichever side is larger.
An account's balance should normally sit on its increase side. Cash with a credit balance means you have paid out more than you held, which is either an overdraft or an error. Accounts Payable with a debit balance means you have overpaid a supplier. Neither is impossible, but both are worth stopping to explain rather than posting past.
Proving the ledger: the trial balance
Once everything is posted, listing every account balance in its debit or credit column and totalling both is the trial balance. If the two totals agree, the arithmetic of double entry has held.
It is worth being precise about what that proves, because it is less than students assume. A balanced trial balance tells you debits equal credits. It does not tell you the entry was right. All of these balance perfectly and are all wrong:
- Posting the correct amounts to the wrong accounts — debiting Equipment instead of Repairs Expense.
- Omitting a transaction entirely, so neither side was ever recorded.
- Recording an entry twice.
- Reversing the entry — debiting what should have been credited and crediting what should have been debited.
A trial balance that does not balance proves an error exists. One that balances proves nothing about whether the entries mean what you intended.
Contra accounts: the deliberate exceptions
Some accounts carry the opposite normal balance to the type they belong to, and they do it on purpose. Accumulated Depreciation is an asset account with a credit balance. Allowance for Doubtful Accounts sits against receivables the same way. Sales Returns and Sales Discounts reduce revenue and therefore carry debit balances.
These are not exceptions to the rule so much as an application of it. The point of a contra account is to keep both figures visible: equipment at what it cost, and separately how much of that cost has been used up. Reducing the asset account directly would give the same net figure and destroy the information a reader needs.
The bank statement paradox, resolved
Why does your bank "credit" your account when money comes in? Because the statement is written from the bank's books. Your deposit is the bank's liability (it owes you that money), and liabilities increase on the credit side. From your own books, the same deposit is a debit to your cash. Same event, two perspectives, both correct.
Common beginner mistakes
- Thinking debit = decrease. (It decreases some account types and increases others.)
- Crediting revenue at cash collection when it was already credited at billing — revenue is recognised once, when earned.
- Treating owner drawings as an expense. They reduce equity directly and never touch the income statement.
- Forgetting that contra accounts (like accumulated depreciation) deliberately carry the opposite normal balance of their partner account.
Make it reflexive
Understanding this article is step one; the goal is for your hands to know the answer before your brain finishes asking. That takes solved problems — ideally with immediate feedback when you pick the wrong side. Accountely's journal entry challenges grade every debit and credit you enter and tell you exactly which line went wrong, and the 30 Days of Accounting path starts right here, at debits and credits. Free to start, no textbook required.