What Is a Debit?

What Is a Debit?

Let me explain what a debit really means in accounting. It's one half of the double-entry system, where every debit you make gets balanced by a credit. When you record a debit, you're either increasing the assets your company owns or reducing the liabilities it owes.

Take this example: if your company borrows money to buy equipment, you'd debit the fixed assets account and credit a liability account for the loan. That's how it works. Sometimes you'll see 'dr' as shorthand for debit, standing for debtor.

Key Takeaways

Remember, debits are the opposite of credits in double-entry accounting. You record debits on the left side of the ledger, always paired with credits on the right. On the balance sheet, you debit positive values for assets and expenses, while crediting negative balances. And crucially, the total of all debits must match the total of all credits—your books have to balance.

The Difference Between a Debit and a Credit

Debits and credits are opposites in this system. In a journal entry, debits go on top, credits below. Using T-accounts, debits sit on the left, credits on the right. They're essential for trial balances to ensure everything adds up—debits equal credits, or your finances are off.

For instance, if a bookstore sells $20,000 in books, it debits cash by that amount and credits inventory. This shows more cash but less stock. Watch out for dangling debits too—they're unpaired entries signaling issues like purchased goodwill without offsets.

Normal Accounting Balances

Certain accounts have natural balances. Assets and expenses? They debit positively—increase with debits, decrease with credits. Say you get $1,000 cash: debit the cash account because assets rise. Pay out $500? Credit cash, as it's decreasing.

Debits increase expense accounts on the income statement, credits decrease them. Liabilities, revenues, and equity? Natural credit balances—debits reduce them. Debit accounts payable? That cuts your liability, likely offset by a cash credit for payment. Revenues drop with debits, rise with credits.

Debit Notes

Debit notes prove a legitimate debit in B2B dealings. If you return materials to a supplier, issue one to validate the reimbursement. They're also used to fix errors in invoices, like wrong fees. Similar to invoices, but they handle adjustments or returns on past transactions, not new sales.

Margin Debit

When you buy on margin, you're borrowing from your broker to get more shares. The debit balance in your account is what you owe for that borrowed cash. It's the amount you must deposit to settle after a purchase. Contrast it with credit balances in short positions, which include short sale proceeds plus required margins. For mixed accounts, the adjusted debit balance accounts for owed amounts minus short profits and special balances.

Contra Accounts

Contra accounts offset normal balances for valuation. Their debits work oppositely. Take allowance for uncollectible accounts—it offsets receivables. Debiting it decreases the allowance, unlike normal assets where debits increase them.

The Bottom Line

A debit decreases liabilities or increases assets. In double-entry, record them left on the ledger, offset by right-side credits. Debit positives for assets and expenses, credit negatives. This debit-credit pairing underpins all double-entry bookkeeping—get it right, and your records stay accurate.