Debits and Credits Made Simple

Debits and Credits — Made Simple In accounting, every transaction affects two accounts.

One account is debited, and the other is credited. This system keeps the balance sheet

perfectly balanced at all times. Now, here’s the key idea: For some accounts,

a debit increases the balance. For other accounts, a credit increases the balance.

It all depends on where the account appears on the balance sheet. Let’s look at an

example. Imagine a business makes a cash sale of $1,000. This transaction

affects two accounts: Cash and Revenue. Cash increases, so we debit Cash by $1,000

Revenue increases, so we credit Revenue by $1,000 That revenue then flows into net income,