Debits and credits

Debit and credit are the two aspects of every financial transaction. Their use and implication is the fundamental concept in the double-entry bookkeeping system. The fundamental rule of bookkeeping is that for every debit transaction there must be a corresponding credit transaction(s) and vice versa.

Debits and credits are a system of notation used in bookkeeping to determine how to record any financial transaction. In bookkeeping, instead of using positive '+' and negative '-' symbols, the notation "Dr" (Debit) and "Cr" (Credit) are used. The words "debit" and "credit" necessarily represent addition or subtraction to an account, but which way round changes depending on the type of account.

The understanding of what is debit and what is credit differs according to the two approaches of double-entry bookkeeping system. Under the traditional approach there are three rules to determine which aspect of a transaction is debit and which aspect is credit. While under the accounting equation approach there are five rules. However effectively the effect of both the approach is the same.