Accounting terms Debit and Credit are essential to a business’s financial wellbeing and record-keeping. In essence, every transaction is tracked by recording a debit or credit in order to create a balanced set of books. Debits increase a business’s liabilities or expenses while credits decrease them. This means that when an expense is incurred, a debit must be recorded in the same amount. On the other hand, any money received from sales or investments will be credited to the business’s account. When debits and credits are used together, this creates the double entry accounting system which ensures that the books remain balanced and all transactions are recorded accurately.