Debits and credits are fundamental concepts in double-entry accounting, used to record every financial transaction in a balanced way. Each transaction affects at least two accounts: one is debited, and the other is credited, ensuring the accounting equation (Assets = Liabilities + Equity) stays in balance.

A debit (abbreviated as “Dr.”) is an entry that increases asset or expense accounts and decreases liability, equity, or revenue accounts. A credit (abbreviated as “Cr.”) does the opposite: it increases liabilities, equity, or revenue accounts and decreases assets or expenses.

For example, when a business purchases office supplies with cash, the supplies account (an asset) is debited, and the cash account (also an asset) is credited, showing a shift in resources. Similarly, when a customer pays an invoice, the cash account is debited (increase in assets) and accounts receivable is credited (decrease in receivables).

Every journal entry must have at least one debit and one credit, and the total debits must equal total credits. This system provides a built-in check for accuracy and helps prevent errors.

Mastering debits and credits is essential for maintaining accurate financial records and understanding how each transaction affects a company’s financial position. It is the foundation of sound bookkeeping and accounting practices.