Difference between Debit and Credit, Don't Mix Up!

Often some people make mistakes in understanding the difference between debit and credit.

In fact, each account has a different function and must be used for certain types of transactions. It can be difficult to track financial operations when wrong accounts are used or wrong transactions are recorded there.

Thus, it is important to understand the difference between debit and credit in order to maintain proper financial records.

The following is a full explanation of the difference between debit and credit.

Difference between Debit and Credit

Debits are recorded on the left side of a general ledger account, and can increase assets or expenses, or decrease liabilities and equity.

For example, when you use a debit card to transact, money is immediately taken from your bank account balance, causing assets to decrease.

Meanwhile, credits are recorded on the right side of the general ledger account, and can increase liabilities and equity, or decrease assets and expenses.

For example, when you are paid by a customer, the money you earn is added to your assets and causes an increase. This is a credit transaction.

In conclusion, debit and credit are used in financial accounting to refer to several types of transactions. Credit causes an increase in liabilities or equity, while a debit causes a decrease in assets or an increase in costs.

Thus an explanation of the difference between debit and credit, hopefully this is useful.