- Accounting terms
- Debit
Definition: Debits are part of the most fundamental accounting concepts, representing one of the two sides of every transaction recorded.
Debit is a formal bookkeeping and accounting term that comes from the Latin word debere, which means "to owe".
A debit is an expense, or money paid out from an account, that results in the increase of an asset or a decrease in a liability or owners equity. Debit is the positive side of a balance sheet account, and the negative side of a result item.
In bookkeeping, debit is an entry on the left side of a double-entry bookkeeping system that represents the addition of an asset or expense or the reduction to a liability or revenue. The opposite of a debit is a credit.
In double-entry bookkeeping, debits and credits are kept in separate columns allows for each to be recorded independently from the other minimizing mistakes.
An overview of debit in accounting
- To debit a debtor account implies a reduction of debt
- To debit an asset account implies that the assets increase
- To debit an income account implies that income decreases
- To debit an expense account implies that the cost increases
Increased accounts
A debit will increase these accounts:
- Assets (Cash, Accounts Receivable, Inventory, Land, Equipment, etc.)
- Expenses (Rent Expense, Wages Expense, Interest Expense, etc.)
- Losses (Loss on Sale of Assets, Loss from Lawsuit, etc.)
- Sole proprietor's Drawing account
Decreased accounts
A debit will decrease these accounts:
- Liabilities (Notes Payable, Accounts Payable, Interest Payable, etc.)
- Stockholders' Equity (Common Stock, Retained Earnings)
Debit balance
Balance remaining after one or a series of bookkeeping entries. This amount represents an asset or an expense of the entity.
