Debits/Credits in Business

Debits are factors of an accounting transaction which increase assets, while decreasing liabilities/equity.

Credits are factors of an accounting transaction that increase liabilities/equity, while decreasing assets.

Debits and credits record business transactions. Assets, expenses, and dividends increase debits, while decreasing credits. Liabilities, retained earnings, common stock, and revenues are increased by credits and decreased by debits.

Accountants debit asset accounts to increase them but credit liability accounts to increase them, because every transaction on the left (on a balance sheet) must be met with one on the right – Asset increases are debited to asset accounts. Increases in liabilities and owner's equity are credited to liability and owner's equity accounts.