Accounting & Reporting

Debits and Credits Without Fear

Stop guessing which side is which. Learn the one rule that makes every accounting entry in the world obvious, in about ten minutes.

  • Beginner
  • 7 min total
  • 12 chapters

What decision this helps you make: Whether the numbers your bookkeeper or software hands you are actually right, and where to look first when they are not.

What this topic is

Debit and credit are not "good" and "bad" and they are not "money in" and "money out." They are simply LEFT and RIGHT: the two columns every business transaction gets written into, so that the books always balance. Learn what each column does to each type of account and the whole system stops being mysterious.

Why it matters

Every financial statement you will ever read is built out of these two columns. If you cannot read an entry, you cannot check your own books, cannot answer an accountant intelligently, and cannot tell a genuine mistake from a deliberate one. This is the alphabet of business finance.

Who should learn it

Owners who have never taken an accounting class, founders reviewing a bookkeeper's work, managers who read reports but have never seen how they get made, and anyone who freezes at the word "credit."

What you will understand

  • Why debit means left and credit means right, and nothing else
  • The one rule that tells you which side increases any account
  • How to read and write a journal entry from scratch
  • What a balanced trial balance does and does not prove

Prerequisites

Common misconception

"Debit means money going out and credit means money coming in. That's what my bank statement says." Your bank statement is written from the BANK'S books, not yours. When you deposit $1,000, the bank credits your account because the bank now OWES you $1,000, a liability on their books. On your books, that same deposit is a debit to Cash, because your asset went up. Both entries are correct; they are just written by two different sets of books facing each other.