Expenses + Assets are debits
Income + Liabilities + Equity are credits
So an increase in an asset or income is a debit, and a decrease in an asset or income is a credit.
An increase in an expense, liability or equity(capital) is a credit, and a decrease in an expense, liability or equity is a debit.
A useful acronym is AID – Asset Increase is a Debit.
- A sale is made. The asset is the money that goes into the bank account OR the increase in the debt that a customer owes the business. So that is the debit. The other side of the transaction is the Sale, and that is a credit.
- An expense is paid for. Money is paid, so that asset decrease and it is a credit. The other side of the transaction is the expense and that is debited.