Credits and debits are the foundation of accounting. Credits and debits are used to record transactions in accounting double-entry bookkeeping and double-entry accounting systems. The left side of an account is known as the credit side and the right side is called the debit side. When we record a transaction, one account will be credited and a different account will be debited. The total value of all credits will always equal the total value of all debits; this is known as the accounting equation.
Credits indicate an increase in assets, expenses or liabilities, whereas debits indicate a decrease in assets, expenses or liabilities. In other words, when we credit something, it means that it has increased in value, and when we debit something, it means that it has decreased in value. Understanding these differences is essential for keeping accurate books and staying on top of your finances.