Debit Entry

What is a Debit Entry?

A debit entry is a bookkeeping notation that signifies the transfer of value to an account. In double-entry bookkeeping, it is recorded on the left-hand side of an account ledger. This entry can represent various financial changes:

An increase in assets or expenses.
A decrease in liabilities, revenue, or equity.

The fundamental principle of having equal debits and credits for maintaining balanced books ensures accuracy in financial accounting.

Examples

Cash Paid into the Bank from a Debtor:
- Debit: Bank Account (Asset increases)
- Credit: Debtors’ Ledger Control Account (Asset decreases)
Purchasing Office Supplies:
- Debit: Office Supplies (Expense increases)
- Credit: Cash/Bank Account (Asset decreases)
Paying Utility Bills:
- Debit: Utility Expense (Expense increases)
- Credit: Cash/Bank Account (Asset decreases)

Frequently Asked Questions

What does a debit entry do in accounting?

A debit entry increases assets or expenses and decreases liabilities, income, or equity. It is essential in maintaining the duality principle in double-entry bookkeeping.

How does a debit entry differ from a credit entry?

While a debit entry records increases in assets or expenses and decreases in liabilities, revenue, and equity, a credit entry does the opposite. Credit entries increase liabilities, revenue, and equity and decrease assets and expenses.

Why is it called a “debit”?

The term “debit” comes from the Latin word “debere”, meaning “to owe”.

In what scenarios would you use a debit entry?

Debit entries are used for transactions where there’s an increase in asset accounts or expense accounts and a decrease in liability, revenue, or owner’s equity accounts.

Can one transaction have multiple debit entries?

Yes, transactions can involve multiple debit entries. However, to balance the books, an equal amount will be recorded as credits.

Credit Entry

In double-entry bookkeeping, a credit entry records transactions on the right-hand side of an account. It represents either an increase in liabilities, revenue, or equity or a decrease in assets or expenses.

Double-Entry Bookkeeping

A system of accounting where every transaction affects at least two accounts, requiring a debit in one and a credit in another to maintain the accounting equation’s balance (Assets = Liabilities + Equity).

General Ledger

A comprehensive collection of accounts maintained by a company, where all transactions are recorded and summarized.

Debtors’ Ledger Control Account

An account that consolidates all transactions with debtors, summarizing the total amount owed by all customers.

Online Resources

Suggested Books for Further Studies

Accounting Made Simple by Mike Piper
Financial Accounting by Henry Dauderis and David Annand
Intermediate Accounting by Donald E. Kieso, Jerry J. Weygandt, and Terry D. Warfield

Accounting Basics: “Debit Entry” Fundamentals Quiz

### What does a debit entry typically indicate in accounting? - [x] An increase in assets or expenses. - [ ] An increase in liabilities or income. - [ ] A decrease in expenses. - [ ] A decrease in equity. > **Explanation:** A debit entry typically indicates an increase in assets or expenses. ### Which side of the account ledger does a debit entry occur? - [x] Left-hand side. - [ ] Right-hand side. - [ ] Bottom of the page. - [ ] Top of the page. > **Explanation:** In double-entry bookkeeping, a debit entry is recorded on the left-hand side of an account ledger. ### What happens to an asset account when a debit entry is made? - [x] It increases. - [ ] It decreases. - [ ] It remains the same. - [ ] It is transferred. > **Explanation:** An asset account increases when a debit entry is made. ### How would an expense be recorded in the ledger? - [x] As a debit entry. - [ ] As a credit entry. - [ ] As both a debit and a credit entry. - [ ] None of the above. > **Explanation:** An expense is recorded as a debit entry in the ledger since expenses increase with debits. ### What is one primary purpose of a debit entry? - [x] To record the increase in assets or expenses. - [ ] To record the increase in income or equity. - [ ] To record obsolete entries. - [ ] To eliminate bad debts. > **Explanation:** The primary purpose of a debit entry is to record the increase in assets or expenses. ### Which account is credited when cash is deposited into the bank from a debtor? - [ ] Cash Account. - [ ] Bank Account. - [x] Debtors' Ledger Control Account. - [ ] Utility Account. > **Explanation:** When cash is deposited into the bank from a debtor, the Debtors' Ledger Control Account is credited. ### In double-entry bookkeeping, why is it necessary to balance debit and credit entries? - [x] To maintain the accounting equation and ensure accuracy. - [ ] To complicate the accounting process. - [ ] To inflate revenue figures. - [ ] To hide financial discrepancies. > **Explanation:** Balancing debit and credit entries is necessary to maintain the accounting equation (Assets = Liabilities + Equity) and ensure the accuracy of financial statements. ### How does a debit entry affect the liability account? - [x] It decreases. - [ ] It increases. - [ ] It neutralizes. - [ ] It consolidates. > **Explanation:** A debit entry decreases the liability account. ### What effect does a debit entry have on the equity of a company? - [ ] It increases equity. - [x] It decreases equity. - [ ] It remains unchanged. - [ ] It creates equity. > **Explanation:** A debit entry typically decreases the equity of a company since it represents withdrawals or expenses. ### When recording office supplies purchased with cash in the ledger, what is recorded? - [x] Debit: Office Supplies, Credit: Cash. - [ ] Debit: Cash, Credit: Office Supplies. - [ ] Debit: Office Supplies, Credit: Revenue. - [ ] Debit: Bank, Credit: Office Supplies. > **Explanation:** For office supplies purchased with cash, you would record a debit entry to the Office Supplies account and a credit entry to the Cash account.

Thank you for embarking on this journey through our comprehensive accounting lexicon and tackling our challenging sample exam quiz questions. Keep striving for excellence in your financial knowledge!