Debits and credits explained simply (with journal entry examples)

October 30, 2026 · The QuizeGpt Team · 6 min read

Short answer: a debit is an entry on the left side of an account, and a credit is an entry on the right. Debits increase assets, expenses, and dividends (or owner withdrawals). Credits increase liabilities, equity, and revenue. Every transaction has at least one debit and one credit, and the totals must be equal. That’s why the books always balance.

Here’s why the rule works, a trick to remember it, and seven worked examples.

Forget “debit = bad”

Most confusion comes from everyday language. Your bank card is a “debit” card, and money leaving feels bad. In accounting, though, debit and credit don’t mean good or bad, or even plus or minus. They only mean left and right.

Whether a debit makes an account go up or down depends on what kind of account it is. That comes from one equation.

The accounting equation

Every debit and credit rule comes from this:

Assets = Liabilities + Equity

• Assets: what the business owns (cash, equipment, money customers owe it).
• Liabilities: what it owes others (loans, bills it hasn’t paid).
• Equity: what belongs to the owners (money they put in, plus profits kept).

Assets are on the left of the equals sign, so they increase on the left side: debits. Liabilities and equity are on the right, so they increase on the right side: credits.

Revenue and expenses are really parts of equity. Revenue increases equity, so like equity it increases with a credit. Expenses reduce equity, so they work the opposite way and increase with a debit.

The DEALER rule

The easiest way to remember all of it is DEALER:

The first three letters, D-E-A, increase with debits. The last three, L-E-R, increase with credits. To decrease any account, do the opposite.

T-accounts: seeing left and right

Accountants sketch each account as a “T”: debits go on the left, credits on the right.

        Cash
  Debit     |   Credit
  10,000    |   3,000
   2,000    |   1,200
            |     500

Cash is an asset, so debits (money in) increase it and credits (money out) decrease it. Here the balance is 10,000 + 2,000 − 3,000 − 1,200 − 500 = 7,300.

7 journal entries, worked step by step

Let’s follow a new tutoring business through its first month. For each transaction, ask two questions: which accounts change? and does each one go up or down? Then DEALER tells you debit or credit.

1. The owner invests $10,000 cash

Cash (asset) goes up, and owner’s capital (equity) goes up.

2. Buys a laptop and printer for $3,000 cash

Equipment (asset) goes up; cash (asset) goes down. One asset was swapped for another.

3. Buys $500 of supplies on account (to pay later)

Supplies (asset) go up. Nothing has been paid yet, so accounts payable (liability) goes up.

4. Tutors clients and bills them $2,000

The business earned revenue, but hasn’t been paid yet. Accounts receivable (asset) goes up, and service revenue goes up.

Revenue is recorded when it’s earned, not when the cash arrives. That’s the core of accrual accounting.

5. Pays $1,200 rent for the month

Rent expense goes up (debit); cash goes down (credit).

6. Collects the $2,000 from clients

Cash goes up; accounts receivable goes down. There’s no new revenue here, because it was already recorded in entry 4.

7. Pays the $500 supplies bill

Accounts payable (liability) goes down, so it’s debited; cash goes down, so it’s credited.

Check your work: the trial balance

Add up each account’s ending balance and put it on its normal side:

Accounts Receivable and Accounts Payable both ended at zero, so they’re left out. Debits equal credits, 12,000 = 12,000, so the entries balance.

A balanced trial balance proves every entry had equal debits and credits. It doesn’t prove you picked the right accounts, so it’s still worth checking each entry.

The 5 most common mistakes

1. Thinking like your bank statement. When your bank “credits” your account, it’s from the bank’s point of view: your deposit is money the bank owes you, which is a liability for the bank. In your own books, cash coming in is a debit.
2. Recording revenue when cash arrives. Under accrual accounting, revenue counts when it’s earned (entry 4), not when the money comes in (entry 6).
3. Treating paying a bill as an expense. Paying a bill you already recorded (entry 7) reduces a liability. The expense or asset was recorded when you received the bill.
4. Forgetting the second side. Every entry needs at least one debit and one credit. If you’ve only written one line, something’s missing.
5. Mixing up supplies and supplies expense. Supplies you bought are an asset until you use them. They become an expense when used, which usually happens in an adjusting entry at the end of the period.

How to practice so it sticks

• Say it out loud. For each transaction, name the accounts and say “up” or “down” before writing anything. DEALER does the rest.
• Do the trial balance yourself. If it doesn’t balance, finding the error teaches you more than getting it right the first time.
• Get stuck? Look at the steps, then redo the problem. Our free accounting solver walks through a problem one rule at a time. Read the reasoning, close it, and solve the problem again on your own.

FAQ

What is the easiest way to remember debits and credits?

Use DEALER: Dividends, Expenses, and Assets increase with debits; Liabilities, Equity, and Revenue increase with credits. Decreases go the opposite way.

Is a debit an increase or a decrease?

It depends on the account. A debit increases assets, expenses, and dividends, and decreases liabilities, equity, and revenue. “Debit” only means the left side of the entry.

Why must debits equal credits?

Because every transaction affects both sides of the accounting equation (Assets = Liabilities + Equity) equally. If debits didn’t equal credits, the equation would stop balancing.

Is cash a debit or a credit?

Cash is an asset, so its normal balance is a debit. Money coming in is debited to cash, and money going out is credited.

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