Meaning of Debit and Credit
   

You can instruct the computer to add €10,000 to the Cash account by stating, "Enter €10,000 on the left-hand side of the Cash account." You could instruct it to subtract €2,000 by stating, "Enter €2,000 on the right-hand side of the Cash account." (See illustration.) The words debit and credit are shorter ways of giving these instructions. Debit refers to the left-hand side of an account and credit to the right-hand side. To debit means to enter an amount on the left-hand side, and to credit means to enter an amount on the right-hand side.



To record an increase in cash, you make an entry on the left-hand side of the Cash account. For an increase of €10,000, you tell the system, "Debit Cash, €10,000." For a decrease of €2,000, you instruct, "Credit Cash, €2,000." These rules apply to all asset accounts. To increase an asset account, you debit it; to decrease an asset account, you credit it.