What is the difference between debit and credit?
Published
Debit and credit are the two sides of a journal entry. Debit does not always mean someone owes you money, and credit does not always mean you owe someone money. In double-entry accounting, every transaction is recorded with equal debits and credits.
The examples on this page use a fictional business (Al Waha Office Supplies). Figures are illustrative only and are not real business data or sector benchmarks.
Short answer
Debit and credit are the accounting method for recording every transaction from two sides. An account is not debit or credit because it is good or bad. It depends on the account type and whether it increased or decreased. Assets and expenses increase on debit, while liabilities, revenue, and equity increase on credit.
Practical rule
| Account type | Increases on | Decreases on |
|---|---|---|
| Assets | Debit | Credit |
| Expenses | Debit | Credit |
| Liabilities | Credit | Debit |
| Equity | Credit | Debit |
| Revenue | Credit | Debit |
Example 1: credit sale
A business sells goods for SAR 10,000 before VAT, with SAR 1,500 VAT, and the customer has not paid yet.
| Account | Debit | Credit |
|---|---|---|
| Accounts receivable | 11,500 | |
| Sales revenue | 10,000 | |
| Output VAT | 1,500 |
Accounts receivable is debited because an asset increased. Revenue is credited because income increased. Output VAT is credited because it is a liability to the tax authority.
Example 2: paying rent
The business pays SAR 6,000 rent from the bank.
| Account | Debit | Credit |
|---|---|---|
| Rent expense | 6,000 | |
| Bank | 6,000 |
The expense increases on the debit side, while the bank account decreases on the credit side.
Common mistakes
| Mistake | Effect |
|---|---|
| Always tying debit to the customer and credit to the supplier | Entries for expenses and assets are read incorrectly |
| Treating debit as good and credit as bad | Both sides are recording tools, not a judgement on the transaction |
| Memorising the rule without understanding the account type | Revenue and expense entries end up reversed |
Fast decision method
If you do not know whether an account increases on debit or credit, ask two questions: what type of account is it, and is the transaction increasing or decreasing it? Buying an asset increases assets, so the asset is debited. Paying from the bank decreases an asset, so the bank is credited. Earning revenue increases equity indirectly, so revenue is credited.
Example 3: collecting from a customer
A customer pays SAR 4,000 against an existing balance.
| Account | Debit | Credit |
|---|---|---|
| Bank | 4,000 | |
| Accounts receivable | 4,000 |
This does not create new revenue. Revenue was recorded when the invoice was issued. Here, one asset decreases and another asset increases.
Diagnostic questions before posting
| Question | Example |
|---|---|
| Which accounts changed? | Bank, customer, sales, expense |
| What type is each account? | Asset, liability, revenue, expense, equity |
| Did it increase or decrease? | Bank increases on collection and decreases on payment |
| Do debits equal credits? | The entry should not post if it does not balance |
Quick comparison with receivables and payables
Debit and credit are sides of an entry. Accounts receivable and accounts payable are specific balance-sheet accounts. A customer balance is usually debit, but debit by itself is not a synonym for customer.
Frequently asked questions
Does debit mean the customer has not paid?
Sometimes, but not always. Accounts receivable is debited when it increases, but rent expense is also debited when it increases.
Why does revenue increase on the credit side?
Revenue increases equity, and equity accounts increase on the credit side.
Can an entry contain only debits?
No. Every journal entry must have equal debit and credit totals.