Accountancy Resources
Accounting lingo can get a bit confusing at times and nowhere quicker than debits vs. credits. Most business managers and individuals without a finance background have found themselves buried in a torrent of debit and credit conversations with their accountant at least a few times. Here’s a quick guide on what those mean. Debits and credits are the basis of double-entry bookkeeping, for every debit there is a credit. This shows that the impact of any form of transaction will have at least two impacts on the financial statements.
Debits and credits either reduce or increase the balance of an account, depending on the type of account.
| Debits | Credits | |
| Balance Sheet |
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| Income Statement |
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Now when your accountant tells you that he’ll credit the cash account and debit the liability account you know he’s talking about reducing cash and reducing the liability (he’s probably talking about paying a bill). This quick table should help you decipher some of the conversations and e-mails from your accountant.
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