Once you know that every transaction is recorded twice, the next step is learning which side to use. This is where debits and credits come in.
They are not about “good” or “bad”, or about money in and out. They are simply the left and right sides of an account.
A few rules make them automatic. This page is where many beginners either click into place or stay stuck, so go slowly and build the ideas up one at a time.
Debit means left, credit means right
Every account has two sides. The left side is the debit side and the right side is the credit side. That is all the words mean.
When we say “debit the cash account”, we mean make an entry on the left of the cash account. Letting go of any everyday meaning of these words makes the rest much easier.
The confusion usually comes from banking. When your bank says it has “credited your account”, it sounds as if credit means money coming in.
But the bank is writing from its point of view, not yours. To the bank, your deposit is money it now owes you, which is a liability, and liabilities increase on the credit side.
In the business’s own books, the rules below apply every time. So build this habit: ignore what the bank statement seems to say and think only about the account you are recording.
The rule for assets and expenses
Assets (things the business owns, like cash, equipment or inventory) and expenses (costs of running the business, like rent and wages) increase on the debit side. When the business gains an asset or has an expense, you debit that account. If an asset decreases, you credit it.
Picture a small trading business that pays RM800 in cash for a delivery bicycle. The business now owns something new, so the bicycle account (an asset) is debited RM800.
At the same time, cash has gone down, so cash (also an asset) is credited RM800. Both accounts are assets, yet one is debited and the other credited, because one went up and one went down.
That is the point people miss when they try to memorise “assets are always debit”. Assets increase on the debit side. When they fall, they are credited.
The rule for liabilities, capital and income
Liabilities (what the business owes), capital (the owner’s investment) and income (like sales) increase on the credit side. When the business owes more, the owner puts in more, or the business earns income, you credit that account. If one of these decreases, you debit it.
A small example fixes the idea. The owner starts the business by paying RM10,000 of their own money into the business bank account.
Two things move. The bank (an asset) rises, so it is debited RM10,000. Capital (what the business owes back to the owner) rises, so it is credited RM10,000.
Later, the business buys RM5,000 of goods from a supplier who lets it pay next month. Purchases go up on the debit side. The amount owed to that supplier, a liability, goes up on the credit side.
Putting the two rules together
Every transaction has two sides, so one account is debited and another is credited by the same amount. For example, when buying equipment for cash, equipment (an asset) increases, so debit it.
Cash (an asset) decreases, so credit it. The two entries are equal, and the books stay balanced.
A useful habit is to write every transaction as a short sentence before touching the accounts: “the business received X and gave up Y.”
Say a customer pays RM300 cash for goods. The business received cash (asset up, debit RM300) and earned sales (income up, credit RM300). Saying it in plain words first, then turning it into debit and credit, stops you guessing.
A simple way to remember
Many students use the memory aid DEAD CLIC. Debit increases Expenses, Assets and Drawings. Credit increases Liabilities, Income and Capital. Say it a few times, test yourself, and it soon sticks. With it, you can work out almost any entry.
Drawings need a special mention because they trip people up. Drawings are what the owner takes out of the business for personal use, in cash or goods off the shelf. They reduce the owner’s stake, so you might expect them on the credit side with capital.
But drawings sit on the debit side, because they are the opposite of capital. If the owner takes RM200 cash for themselves, drawings are debited RM200 and cash is credited RM200. Treat drawings as their own account instead of squeezing them into capital, and the entries stay clean.
Common confusions
Three mix-ups come up again and again. First, thinking debit means “in” and credit means “out”. It does not.
Whether an account goes up or down depends on the type of account. Second, assuming a debit is always bad news. A debit to the equipment account just means the business owns more.
Third, trying to memorise long tables of entries instead of the two rules. Once you understand the rules, you can rebuild any entry from scratch.
Why the rules never change
These rules are fixed, which is what makes accounting reliable. You can record any transaction by asking two questions: which two accounts are affected, and does each go up or down? The rules then tell you which to debit and which to credit.
This consistency also lets a business prepare a trial balance later, because total debits always equal total credits when the entries are right.
How this fits the bigger picture
The debit and credit rules are the working machinery of double entry. They feed into the ledger, where each account keeps its own running record of debits and credits.
Get these rules secure now, and later topics like balancing accounts, extracting a trial balance and building financial statements become steady, logical steps. Almost everything ahead rests on this foundation.
Practise until it is automatic
The rules feel awkward at first and then, quite suddenly, become second nature. Practise short transactions such as buying, selling, paying and receiving. Say out loud which account you debit and which you credit, then check.
A little regular practice beats memorising a table. Five short transactions a day for a week will do more than one long cramming session. This is a habit of thinking, not a fact to store.
If debits and credits are still confusing, one of our teachers can drill them with you using everyday examples in a one-to-one lesson. You keep going until you can say which side each entry goes on without hesitating. Book a trial class.