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When it comes to accounting, the terms Debits and Credits are two of the most fundamental aspects of making entries into different types of accounts. At first, the two terms may seem hard to understand, but after some insight, you will find that it isn't so complex at all. In many types of accounts, such as T-accounts, transactions will either be debited or credited, depending on the type of transaction. In a typical account, or T-account, as well as asset accounts, liability accounts, equity accounts, and others, the account will be split into two separate halves, rights down the middle. This is what gives the account the name of a "T-account", as you can visual a T shape splitting the two sides in half. On the left side of the account, all of the debits will be reported. On the right side of the account, all of the credits will be reported. Transactions will be debited or credited according to if you are removing, or adding value to that side of the account. Debits will always be on the left, while credits will always be found on the right. When recording transactions, debits will always come before the right side is credited. The net balance between debits and credits is known as the account balance. If debits are more than credits, then the account has a debit balance. If it is the other way around, the account will have what's known as a credit balance.

In accounting, the total amount of assets will always total, or equal the amount of liabilities plus equity. Think of it this way, assets will have their own T-account(having two sides for both debits and credits), while liabilities, as well as equity, will both have their own separate T-accounts as well. Since assets will always be balanced or equal the amount of liabilities and equity, when an amount is added to one side of the equation(assets), the same amount will be added to the other side of the equation(liabilities and equity), unless an equal net change in debits and credits is made to one singular account. When we "debit" an account, we are adding value to the account. When we are crediting an account, we are doing the opposite in removing value. In an example, let's say I conduct services for a client and they pay me $100 in cash. That $100 in cash is then debited or added to the left side of my asset account, as we are adding, or "debiting" to the total of cash. Since there is an added 100 in value to the asset account, there must also be a 100 added in value to the other side of the equation, either the liability, or the equity account. For this transaction in particular, the $100 paid in cash is known as services revenue, which goes under the equity account. In regards to which side that 100 in value goes to, we are crediting the equity account, therefore balancing out the equation. In another example, let's say my business is running low on supplies, so I make a $1000 purchase in cash to stock up on new supplies. Cash is an asset and I am removing $1000, as I am giving it up for supplies. This causes cash to be credited for 1000 in the asset account. Since I am gaining a total of $1000 in supplies, I am debiting the supplies account, which is an asset. Since I am removing $1000, as well as adding $1000 in the same account, the net balance for that transaction will total 0, or be equal.

For different types of transactions, different accounts and different side of the accounts will either be debited or credited, depending on what type of transaction is occurring. For me, the most important thing to remember is that the total you are debiting, in the end will equal the total you are crediting. Debits and credits will be balanced. When deciding on which account to debit, or credit, it's important to know what type of transaction you are dealing with. This will help you decide which account to make the addition or subtraction. To ensure that you've reported the transaction properly, the last thing to note is that the asset account will equal the accounts of both liabilities and equity.