Debit

A debit is an entry on a financial statement that decreases the value of an asset or increases the value of a liability. Debits are recorded on the left side of a T-account, and they are used to track the inflow and outflow of money.

There are two main types of debits:

• Debit entries: These entries decrease the value of an asset or increase the value of a liability. For example, if you buy a new car, you will debit your checking account and credit your car loan account.
• Contra-asset entries: These entries decrease the value of an asset without increasing the value of a liability. For example, if you write off an uncollectible account, you will debit your accounts receivable account and credit your allowance for doubtful accounts account.

Debits are important because they help to track the financial transactions of a business. By understanding how debits work, you can better understand the financial health of a company.

Here are some additional details about debits:

• Debits are used to record the cost of goods sold, expenses, and other liabilities.
• Debits are also used to record the purchase of assets, such as land, buildings, and equipment.
• Debits can be either positive or negative. A positive debit increases the value of an asset or decreases the value of a liability. A negative debit decreases the value of an asset or increases the value of a liability.
• The sum of all debits and credits in a T-account must always be zero.

Debits are an important part of financial accounting. By understanding how debits work, you can better understand the financial health of a company.