Debit Credit is an accounting term that refers to the two sides of a transaction. When an entity receives money, this is known as a “debit” to its account; when money is paid out, it is known as a “credit” to its account. Debits and credits are essential components of modern accounting, as they help entities track and manage their financial transactions. In short, debits increase assets or expenses, while credits decrease assets or liabilities. By tracking these changes, businesses can get a better understanding of their overall finances.