The Definition of a Debit in Accounting
- The accounting world as we know it, is made up of debits and credits. .These words were coined centuries ago, when accounting was evolving into the double-entry system we use nowadays. The words can be found in the Middle French language as "debet," meaning "to owe". The French word "debere," a modified form of "debet," gave origin to the accounting debit abbreviation of "DR."
- Accounts makes up the backbone of accounting. Accounts exist for cash, accounts receivable, payable, revenues and expenses. Each account is classified as a debit account or a credit accounts. Example of debit accounts are: cash, accounts receivable, notes receivable, inventory and expenses. Identifying accounts as debit or credit are the first step to properly increase or decrease them.
Debit as a Modifier
- The word "debit" is used to modify balances in accounts. If an account is a debit account, it will increase it. If an account is a credit account, it will decrease it. Let's take for instance cash, a debit account. If we get $200 as income, we would debit cash for $200, increasing it. A debit increasing cash...only in accounting.
Outside accounting, a debit means a decrease in cash, not an increase. When learning accounting, you need to ignore the day-to-day meaning of a debit or you will be confused forever.
- Debits are always followed by credits. Accounting has duality involving debits and credits, reflecting the double-entry method. One doesn't exist without the other. In order to modify accounts, there is always at least a debit to one account and a credit to another. When accounts are modified, at least two accounts are changed, and at least one gets a debit. Oddly enough, debits are often referred to as "left-side" transactions because when using "T" accounts as illustrations, debits are always on the left hand side of the "T."
- When setting up accounts in a software, they must be classified as debit or credit accounts. Many times accounts are already hard-coded in the system, classified as debits or credits. Users then only classify new accounts as assets (debits) or payables (credits), for example. They system does the rest behind the scenes.