What is a Debit Entry?
A debit entry is a way of recording a payment made or owed in accounting. It is an entry that increases an asset or expense account or decreases a liability or equity account. Debit entries are always recorded on the left side of a ledger account.
Debit entries are part of the double-entry bookkeeping system, which means that every transaction affects two accounts: one is debited, and the other is credited. The total amount of debits must always equal the total amount of credits for each transaction. This ensures that the accounting equation (Assets = Liabilities + Equity) is always balanced.
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Some examples of debit entries are:
- When a business buys inventory on cash, it debits its inventory account and credits its cash account.
- When a business pays rent for the month, it debits its rent expense account and credits its cash account.
- When a business collects money from a customer, it debits its cash account and credits its accounts receivable account.
Debit entries can also be used to correct errors or adjust previous transactions. For example, if a business overcharged a customer by $100, it can debit its sales revenue account and credit its accounts receivable account to fix the mistake.