Every Story Has Two Sides
Double-entry bookkeeping is the mechanical discipline keeping the accounting equation true. Every transaction is recorded as at least two entries, a debit and a credit of equal amount, so .
The vocabulary is counter-intuitive. Debit and credit are not good and bad; they are column labels: left and right.
| Account type | Debit (left) | Credit (right) |
|---|---|---|
| Asset | Increase | Decrease |
| Expense | Increase | Decrease |
| Liability | Decrease | Increase |
| Equity | Decrease | Increase |
| Revenue | Decrease | Increase |
The mnemonic pattern: left-side family (assets, expenses) grows with debits; right-side family (liabilities, equity, revenue) grows with credits.
Mechanics in Action
A T-account is the visual tool: account name on top, debits on the left limb, credits on the right. The balance is the difference between sides.
Example: pay a 200 supplier invoice.
- Debit: Accounts Payable 200 (liability decreases).
- Credit: Cash 200 (asset decreases).
Both equation sides fall by 200.
The duality principle links entries to the equation: equal debits and credits preserve balance automatically. If you record only one side, the trial balance screams.
Common pitfall: Importing everyday meanings. A debit to Cash is money arriving. Your bank statement uses the bank's perspective, reversing this logic.