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What Is Debit?

Commerce Glossary > Debit (DR)

Debit Definition | TLDR

Debit (DR) is a financial term representing an entry on the left side of a double-entry accounting system, indicating an increase in assets or expenses, or a decrease in liabilities, equity, or revenue accounts.

Debit (DR) Meaning

Debit (DR) in accounting refers to an entry made on the left side of an account ledger to record an increase in assets, expenses, or decreases in liabilities and equity. It is a fundamental concept in double-entry bookkeeping, where every financial transaction involves both a debit and a credit entry. Debits are used to record the flow of economic value into an organization, such as cash received, inventory purchased, or expenses incurred. They serve as the mechanism to track increases in the resources owned by a business or reductions in its obligations.

How does the use of debit (DR) impact accounting transactions and financial statements?

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Debit (DR) in accounting refers to an entry made on the left side of an account ledger to record an increase in assets, expenses, or decreases in liabilities and equity. It is a fundamental concept in double-entry bookkeeping, where every financial transaction involves both a debit and a credit entry. Debits are used to record the flow of economic value into an organization, such as cash received, inventory purchased, or expenses incurred. They serve as the mechanism to track increases in the resources owned by a business or reductions in its obligations.

Understanding the principles of debits is essential for maintaining accurate financial records and preparing financial statements. Debits and credits enable businesses to track the flow of financial transactions, monitor changes in asset and liability balances, and assess the overall financial health of the organization. By adhering to established accounting standards and principles, businesses can ensure the integrity and reliability of their financial reporting, enabling stakeholders to make informed decisions based on the company's financial performance and position.

FAQs

Yes, a debit (DR) transaction can increase the balance of an asset account. Debits are used to record increases in assets such as cash, inventory, equipment, and accounts receivable.

Yes, a debit (DR) entry can reduce the balance of a liability account. Debits are used to decrease liabilities such as accounts payable, loans payable, and accrued expenses.

Yes, a debit (DR) transaction can be used to record expenses incurred by a business. Expenses are typically recorded with debit entries, which decrease equity or increase liabilities depending on the nature of the expense.

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