Debits and credits, finally explained

Almost everyone who touches accounting hits the same wall early: debits and credits refuse to mean what the words suggest. A “credit” sounds like money coming in and a “debit” like money going out — and in bookkeeping that’s often backwards. Once the real rule clicks, though, it never un-clicks.

The one rule underneath everything

Every account lives in one of five families — assets, liabilities, equity, income, expenses — and each family has a “natural” side that makes it grow:

• Assets and expenses increase with a debit.
• Liabilities, equity and income increase with a credit.

That’s it. A debit isn’t good or bad, and neither is a credit — each just pushes an account up or down depending on which family it’s in. Paying cash for supplies debits an expense (up) and credits cash (an asset, down).

Why every entry has two sides

Accounting is “double-entry” because every transaction affects at least two accounts, and the debits must always equal the credits. That balance is the system’s self-check: if a set of books doesn’t balance, something is missing or miscoded. It’s why a trial balance is called a balance — total debits should equal total credits.

The mnemonic that survives exams

DEALER: Debits increase Expenses, Assets and Losses; credits increase the rest (Equity, Revenue). Or simply: assets and expenses “want” the left; everything else wants the right.