New words in this lesson
Account A named place in the books where one kind of money is tracked, such as Checking, Rent or Food sales. Every transaction changes at least two accounts.
Double-entry bookkeeping The system where every transaction is recorded in at least two accounts, with equal debits and credits. It keeps the accounting equation balanced and makes mistakes easier to spot.
Debit An entry on the left side of an account. A debit increases assets and expenses, and decreases liabilities, equity and income. It doesn't mean good or bad.
Credit An entry on the right side of an account. A credit increases liabilities, equity and income, and decreases assets and expenses. It doesn't mean good or bad.
T-account A simple drawing of one account shaped like a T: debits on the left, credits on the right. Used to learn and to work out entries on paper.
Journal entry A record of a transaction that lists the accounts debited and credited and the amounts. Debits must equal credits. In software, most entries are made for you by forms such as invoices.
General ledger All the accounts with every debit and credit posted to them, so you can see each account's activity and balance.
Look up any other word in the glossary ↗ (opens in a new tab) Every transaction touches two accounts An account is a named place in the books that tracks one kind of money, such as Checking (the bank), Rent or Sales.
In double-entry bookkeeping , every transaction is recorded in at least two accounts one gets a debit , the other a credit , for the same amount. That's what keeps the accounting equation balanced.
Debit simply means left side and credit means right side They don't mean good or bad, or money in or out. Bookkeepers sketch each account as a T-account : debits on the left, credits on the right.
A $500 cash sale: Checking is debited, Sales is credited Debit Checking Money in the business bank account $500.00
Credit Sales $500.00