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Accounts Payable

The rules of debit and credit?


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Wiki User
October 14, 2012 12:50AM

Generally a debit is cash coming in, while credit is cash going out. As products are sold, you need to debit the Revenue account while simultaneously crediting the Inventory account. Meanwhile, if you need to borrow against your stake in the company in order to restore cash reserves you would credit your Owner's Equity account and debit the account the money is going towards- usually Checking or an account simply called Cash.

In accounting, debits and credits need to balance each other out since every transaction and transfer affects at least two accounts. If they are unbalanced, you might not have an accurate view of how your business is doing.