Debit
Debit is a formal
bookkeeping and
accounting term that comes from the
Latin word
debere, which means "to owe". The Latin
debitum means "debt". The opposite of a debit is a
credit. Debit is abbreviated
Dr, while credit is abbreviated
Cr.
A debit changes the balance of an account.
Asset and
expense accounts increase in value when debited, whereas
liability,
equity, and
revenue accounts decrease in value when debited. This distinction is somewhat counterintuitive, until the nature of those accounts is more closely scrutinized. For example, revenue is coded as a credit. After recording a day's sales, the company will have credited a certain amount in revenue, and since credits are negative numbers, the balance grows more and more negative. An adjustment to revenue would need to be a debit, because its purpose is to bring the revenue totals closer to zero.
For instance, the journal entry for paying the telephone bill might look like this:
| Description | Debits!Credits |
|---|
| Phone expense | $200 | |
| Cash | | $200 |
The telephone company would record the exact same transaction (from their side) like this:
| Description | Debits!Credits |
|---|
| Cash | $200 | |
| Revenue | | $200 |
Many people who have no formal education in accounting often assume that a debit decreases a balance because use of a bank's
debit card decreases the balance in the customer's account. However, it is called a debit card because, from the bank's perspective the customer's account is a liability. By withdrawing money, the customer is decreasing the bank's liability. Since liability accounts normally have a credit balance, the withdrawal of cash from a banking account is reflected on the bank's
balance sheet as a debit.
