Debit and credit

Meaning

Debit (مدين) and credit (دائن) are the two columns of double-entry bookkeeping. Every transaction is recorded twice, once on each side, for equal amounts, so the books always balance. The rule is mechanical: a debit increases an asset or an expense and decreases a liability, equity or income; a credit does the reverse. The words carry no sense of good or bad; a debit to the bank account is money arriving.

Reading an entry becomes easy once the account types are known. Receiving a customer's payment debits Bank (an asset rises) and credits Accounts Receivable (an asset falls). Paying rent debits Rent Expense and credits Bank. Taking a loan debits Bank and credits Loans Payable. A customer's statement showing "Cr" means the customer is owed, or has overpaid.

Also called: Dr and Cr · double entry · المدين والدائن

Example

Al Noor pays October's rent of 5,000.00 by transfer. The entry debits Rent Expense 5,000.00 and credits Bank 5,000.00. At month end the expense sits in the income statement and the bank balance in the balance sheet is 5,000.00 lower; the two sides of the trial balance still agree.