What is the credit side and debit side?

In accounting, the credit side and debit side refer to the two sides of a ledger account where transactions are recorded.

- Debit side: This is the left side of the account where increases in assets, expenses, and losses are recorded. Debits are used to record transactions such as purchases, payments, and withdrawals.

- Credit side: This is the right side of the account where increases in liabilities, revenues, and gains are recorded. Credits are used to record transactions such as sales, income, and investments.

In double-entry accounting, every transaction must have both a debit and a credit entry to ensure that the accounting equation (Assets = Liabilities + Equity) remains balanced.

Credit Side:

- The right-hand side of an accounting entry or account.
- Represents increases in assets (e.g., Cash, Accounts Receivable), revenue (e.g., Sales), or common equity (e.g., Retained Earnings).

Debit Side:

- The left-hand side of an accounting entry or account.
- Represents increases in liabilities (e.g., Accounts Payable, Loans Payable), expenses (e.g., Rent Expense, Salary Expense), or deductions from common equity (e.g., Dividends).

Rules for Debits and Credits:

- Assets: Debit to increase, credit to decrease.
- Liabilities: Credit to increase, debit to decrease.
- Common Equity: Credit to increase, debit to decrease.
- Revenue: Credit to increase, no debit (revenue increases are always credited).
- Expenses: Debit to increase, no credit (expenses increase are always debited).