# Debits and credits

> Debit means left and credit means right. Not good and bad, not plus and minus. Stop translating them into signs and everything else gets easier.

Source: https://lopifi.com/learn/debits-and-credits
Part of: Lopifi — US GAAP books on autopilot, reviewed by a CPA (https://lopifi.com)

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**What do debit and credit actually mean in accounting?** Debit means left and credit means right. Not good and bad, not plus and minus. Stop translating them into signs and everything else gets easier.

Here is the whole definition, and it disappoints everyone: [Debit](https://lopifi.com/md/glossary/debit) means the left column. [Credit](https://lopifi.com/md/glossary/credit) means the right column. That is it. They are not positive and negative, they are not increase and decrease, and they are certainly not good and bad. Your bank telling you it has "credited your account" is describing *its* books, where your money is a liability it owes you.

> **Debit = left. Credit = right. What that does to an account depends entirely on what kind of account it is.**

The reason accountants keep two columns instead of one signed number is proof. With two columns, the sum of every left-hand entry must equal the sum of every right-hand entry — across one entry, across a day, across the whole ledger. A signed column that sums to zero proves the same thing, but it hides each side's own total, which is what you foot against a bank statement or a subledger, and it makes every reader work out the sign before they can read the number.

**Wrong:** amount: -1240.56

**Right:** debit: 0    credit: 124056

One signed number is not a journal entry. It cannot be proved, and it cannot be footed against a subledger. (And the amount is held in cents — integers, never a float.)

## The T-account

Draw a T. Write the account name on top, debits down the left, credits down the right. That is a [T-account](https://lopifi.com/md/glossary/t-account) — a classroom sketch of the two-sided ledger page merchants have kept for centuries, still the fastest way to think about an entry, and the thing every ledger screen in every accounting system is a dressed-up version of.

*[T-account: 1000]*

Northwind's cash account for September. Nine movements, and a balance that is the difference between the columns.

Notice what the two columns give you that a running total does not: $86,500 came in and $53,600 went out. A single balance of $32,900 hides both of those, and "how much cash moved through this account" is a question with a fraud-detection use.

## Reading an entry out loud

An accountant reads an entry as *debit this, credit that*, debits first, always with the amounts. Getting used to the phrasing is most of the battle: **debit inventory 18,000, credit accounts payable 18,000** is one fact about the world — goods arrived and are not paid for — said in the only language the ledger accepts.

*[Journal entries: JE-4]*

One entry, both sides, with the reasoning that produced it.

*[Interactive figure: double entry]*

JE-4: $18,000 of stock arrives from a supplier, on 30-day terms. Each line drops into its own pan — debits left, credits right — and the beam only levels, and the entry only posts, when the two sides are equal.

> **Two habits that prevent most first-month errors.** Decide the type of every account an entry touches before you decide a side — the side follows from the type. And write the debit line first, indented credits after, every time: an entry laid out the same way every time is an entry a reviewer can read in two seconds.

**Exercise — Finish JE-4.** Northwind receives $18,000 of stock from a supplier on 30-day terms. The debit is written. Write the credit — and note that no cash account appears anywhere in this entry. Type it in the workbook at https://lopifi.com/playground.

**Check yourself.** Northwind collects $14,000 from a customer who was invoiced in September. What is the entry?

- Debit cash 14,000, credit revenue 14,000 — The revenue was already recorded when the goods were delivered on the 15th. Recording it again would count the same sale twice.

- Debit cash 14,000, credit accounts receivable 14,000 — One asset becomes another. The income statement never hears about a collection — which is exactly why profit and cash differ.

- Debit accounts receivable 14,000, credit cash 14,000 — That is the entry backwards: it would say cash left and the customer owes more.

- **Lesson:** 4 of 13 — 8 min
- **Terms taught:** [Debit](https://lopifi.com/md/glossary/debit), [Credit](https://lopifi.com/md/glossary/credit), [Double-entry](https://lopifi.com/md/glossary/double-entry), [T-account](https://lopifi.com/md/glossary/t-account), [Normal balance](https://lopifi.com/md/glossary/normal-balance)
- **Previous:** [Accounts, and the five types](https://lopifi.com/md/learn/accounts-and-the-chart)
- **Next:** [Recording the month](https://lopifi.com/md/learn/recording-the-month)
- **The course:** https://lopifi.com/learn