Whether bookkeeping tasks are performed manually by a bookkeeper or electronically by clerks, one thing remains the same: every business transaction involves at least two accounts. This is known as double entry bookkeeping (or “double entry accounting”). Double entry bookkeeping requires that for each transaction, one (or more) account must be debited, and one (or more) account must be credited.

Debits on the Left, Credits on the Right

Every account has two “sides,” a right side and a left side. A debit refers to an entry on the left side of an account, and a credit refers to an entry on the right side of an account. Double entry bookkeeping requires that for every transaction, there is an entry to the left side of one (or more) account, and a corresponding entry to the right side of another account(s).

Below are some facts that will help you determine which side of an account to use:

Expenses and assets are always debits

Revenues, liabilities and equity are always credits

Here are some additional facts…

A debit will increase these accounts:

Assets (Cash, Accounts Receivable, Inventory, Land, Equipment, etc.)

Expenses (Rent Expense, Wages Expense, Interest Expense, etc.)

Losses (Loss on Sale of Assets, Loss from Lawsuit, etc.)

Sole proprietor’s Drawing account

A debit will decrease these accounts:

Liabilities (Notes Payable, Accounts Payable, Interest Payable, etc.)

Stockholders’ Equity (Common Stock, Retained Earnings)

A credit will increase these accounts:

Liabilities (Notes Payable, Accounts Payable, Interest Payable, etc.)

Revenues (Sales, Service Revenues, Fees Earned, Interest Revenues, etc.)

Gains (Gain on Sale of Assets, Gain on Retirement of Bonds, etc.)

A credit will decrease these accounts:

Assets (Cash, Accounts Receivable, Supplies, Inventory, Land, etc.)

The site provided below will help you with illustrations.