Finance Dictionary
Debit
Definition
An accounting entry that either increases an asset or expense account, or decreases a liability or equity account.
Deep Dive
In the realm of double-entry accounting, a debit is a fundamental entry that plays a crucial role in maintaining the balance of financial records. It is one half of every financial transaction, reflecting a movement of value within a company's accounts. Contrary to common intuition, "debit" does not inherently mean "decrease"; its effect on an account's balance depends entirely on the type of account it is affecting.
Examples & Use Cases
- 1A company purchases new office furniture for cash, leading to a debit to the "Furniture & Fixtures" asset account.
- 2A business pays its monthly utility bill, resulting in a debit to the "Utilities Expense" account.
- 3A customer returns goods, causing the company to debit "Sales Returns and Allowances" and credit "Accounts Receivable."
Related Terms
CreditGeneral LedgerDouble-Entry Accounting