Debit and credit explained simply: rules, examples and a ledger cheat sheet
Debit and credit are the two sides of every accounting entry: a debit is recorded on the left side of an account and a credit on the right. Whether a debit increases or decreases an account depends on the account type — debits increase assets and expenses, credits increase liabilities, equity and income. Every transaction has equal debits and credits, so the books always balance. Below: the rule in one table, a printable cheat sheet, debit and credit entries in a customer ledger and a supplier ledger with worked examples, what a debit or credit balance means, why bank statements look reversed, and the apps that keep the ledger for you — including Account Ledger by Ofisx, which shows each customer's and supplier's running balance without you having to think in debits and credits.
Short answer
- Debit (Dr) = left side of an account. Credit (Cr) = right side. The words do not mean "good" or "bad".
- Debits increase: assets (cash, receivables, inventory), expenses and owner's drawings/dividends.
- Credits increase: liabilities (payables, loans), owner's equity and revenue (sales).
- Customer ledger: a sale on credit is a debit to the customer (they owe you more); their payment is a credit (they owe you less).
- Supplier ledger: a purchase on credit is a credit to the supplier (you owe more); your payment is a debit (you owe less).
- Every entry balances: total debits = total credits. A $500 credit sale is Dr Accounts Receivable $500 / Cr Sales $500.
The debit and credit rule (DEALER)
Accountants remember the rule with DEALER: Dividends (or drawings), Expenses and Assets increase with a debit; Liabilities, Equity and Revenue increase with a credit. The opposite entry decreases each one.
| Account type | Examples | Increase with | Decrease with | Normal balance |
|---|---|---|---|---|
| Asset | Cash, bank, accounts receivable (customers who owe you), inventory, equipment | Debit | Credit | Debit |
| Expense | Rent, wages, fuel, cost of goods sold | Debit | Credit | Debit |
| Drawings / dividends | Money the owner takes out | Debit | Credit | Debit |
| Liability | Accounts payable (suppliers you owe), loans, sales tax payable | Credit | Debit | Credit |
| Equity | Owner's capital, retained earnings | Credit | Debit | Credit |
| Revenue | Sales, service income, interest received | Credit | Debit | Credit |
Why it works: the accounting equation is Assets = Liabilities + Equity. Assets sit on the left of the equation, so they grow on the left (debit); liabilities and equity sit on the right, so they grow on the right (credit). Revenue adds to equity, so it is a credit; expenses reduce equity, so they are debits.
Debit and credit cheat sheet: 10 everyday transactions
| Transaction | Debit | Credit |
|---|---|---|
| You sell goods for cash, $300 | Cash $300 | Sales $300 |
| You sell goods on credit to a customer, $500 | Accounts receivable — customer $500 | Sales $500 |
| The customer pays $200 of it | Cash/bank $200 | Accounts receivable — customer $200 |
| The customer returns goods worth $50 | Sales returns $50 | Accounts receivable — customer $50 |
| You buy stock on credit from a supplier, $800 | Inventory (or purchases) $800 | Accounts payable — supplier $800 |
| You pay the supplier $600 | Accounts payable — supplier $600 | Cash/bank $600 |
| You pay rent, $1,000 | Rent expense $1,000 | Cash/bank $1,000 |
| The owner puts in $5,000 | Cash/bank $5,000 | Owner's capital $5,000 |
| The owner takes out $400 | Drawings $400 | Cash/bank $400 |
| You take a $10,000 bank loan | Cash/bank $10,000 | Loan payable $10,000 |
Check any entry with one question: which account got bigger, and what type is it? If an asset or expense grew, that side is the debit; if a liability, equity or revenue grew, that side is the credit.
Debit and credit entries in a customer ledger (example)
A customer's account in your books is part of accounts receivable, an asset. So everything that makes the customer owe you more is a debit, and everything that makes them owe you less is a credit. Here is Harbor Café's account at a food wholesaler, kept as a running-balance ledger:
| Date | Description | Debit (they owe more) | Credit (they owe less) | Balance |
|---|---|---|---|---|
| Oct 1 | Balance brought forward | $350.00 Dr | ||
| Oct 4 | Invoice #2210 — coffee, milk, cups | $620.00 | $970.00 Dr | |
| Oct 9 | Payment — bank transfer | $500.00 | $470.00 Dr | |
| Oct 12 | Return — 2 damaged cases | $45.00 | $425.00 Dr | |
| Oct 18 | Invoice #2251 — weekly order | $540.00 | $965.00 Dr | |
| Oct 20 | Payment — check | $965.00 | $0.00 |
"Dr" after the balance means a debit balance: the customer owes you. That is the normal balance of a customer account. If Harbor Café had paid $1,000 on Oct 20 instead of $965, the balance would be $35.00 Cr — a credit balance, meaning you owe them (an overpayment or a deposit) until you refund it or use it against the next invoice. The same layout, with a sample to copy, is on the client ledger page.
Debit and credit entries in a supplier (vendor) ledger
A supplier's account is part of accounts payable, a liability. It works the other way round: a purchase on credit is a credit (you owe more), and your payment or a return to the supplier is a debit (you owe less). The normal balance of a supplier account is therefore a credit balance.
| Date | Description | Debit (you owe less) | Credit (you owe more) | Balance |
|---|---|---|---|---|
| Oct 2 | Bill #A-118 — packaging | $1,200.00 | $1,200.00 Cr | |
| Oct 10 | Return — wrong size boxes | $150.00 | $1,050.00 Cr | |
| Oct 16 | Payment — bank transfer | $1,050.00 | $0.00 |
When the same business is both your customer and your supplier, keep one account for them and read the sign of the balance: debit means they owe you, credit means you owe them. More on the payables side in accounts payable tracking.
Why your bank statement shows debit and credit the other way round
On your bank statement, a deposit is shown as a credit and a withdrawal or card payment as a debit — the opposite of the cash account in your own books. That is because the statement is written from the bank's point of view: the money in your account is money the bank owes you, a liability on its books. When you deposit, the bank's liability to you grows, so it credits your account. In your own books the same deposit is a debit to cash.
The same applies to a supplier's statement you receive: it shows your purchases as debits (you owe them), while your own ledger shows them as credits to the supplier. Both are correct; they are mirror images.
Common debit and credit mistakes
- Thinking "credit" means money coming in. In your own books, money coming in is a debit to cash.
- Recording a customer payment as a debit to the customer. It reduces what they owe, so it is a credit to their account.
- Recording only one side. An entry with a debit and no credit leaves the trial balance out of balance.
- Ignoring a credit balance on a customer. It is money you owe them; refund it or apply it to the next invoice and note which.
- Deleting a wrong line. Post a reversing entry instead, so the history still matches the customer's own records.
Apps and tools that handle debits and credits compared
| Option | Best for | Debits and credits | Customer and supplier balances | Platforms | US App Store ratings (Oct 21, 2026) |
|---|---|---|---|---|---|
| Account Ledger by Ofisx | Small businesses that sell or buy on account and only need who owes whom | Handled for you: you record a sale, payment or return; the app updates the balance | Running balance per customer and supplier, PDF statement, WhatsApp balance message | iPhone (US App Store); Android on Google Play in Turkey only | New in the US store — no ratings yet |
| Intuit QuickBooks | Businesses that want full double-entry books | Posted automatically from invoices, bills and bank feeds; journal entries possible | Customer and vendor balances inside full accounting | iPhone, Android, web | 272,947 ratings, 4.7 |
| Zoho Books | Small businesses that want full books at a lower tier | Posted automatically; manual journals available | Customer and vendor statements inside full accounting | iPhone, Android, web | 5,260 ratings, 4.8 |
| Wave | Very small businesses that invoice in Wave | Posted automatically from Wave invoices and transactions | Customer balances from Wave invoices | iPhone, Android, web | 6,665 ratings, 4.4 |
| Spreadsheet with Debit, Credit and Balance columns | Learning, or a handful of accounts | You enter each side yourself | One sheet per customer; balance = previous balance + debit − credit | Any | — |
The options in detail
Account Ledger by Ofisx
Account Ledger keeps one ledger per customer or supplier — sales on credit, payments, partial payments and returns — and shows the running balance, so you see who owes you and whom you owe without posting debits and credits by hand. You can share a customer's full ledger as a PDF statement or send their balance by WhatsApp, and due-date alerts show what is coming up or overdue.
It is not a double-entry accounting package: there is no chart of accounts, general ledger or balance sheet. Keep those with your accountant or a full accounting app.
Intuit QuickBooks
QuickBooks runs a full chart of accounts and posts the debits and credits behind each invoice, bill and payment. Best when you or your accountant want complete books in one place.
Zoho Books
Zoho Books is double-entry accounting with invoicing, bills and statements; it suits businesses already using other Zoho tools.
Wave
Wave combines invoicing and double-entry bookkeeping for very small businesses.
Spreadsheet with Debit, Credit and Balance columns
A spreadsheet is the best way to learn debits and credits. For a customer sheet, put the balance formula in the last column (=E2+C3-D3) and copy it down. It gets slow and error-prone once you have dozens of customers or several people entering payments.
How to get debits and credits right
- Start from the account type — Ask whether the account is an asset, liability, equity, revenue or expense; the DEALER table then tells you which side increases it.
- Read customer accounts as receivables — Sale on credit = debit the customer; payment or return = credit the customer. A debit balance means they owe you.
- Read supplier accounts as payables — Purchase on credit = credit the supplier; payment or return = debit the supplier. A credit balance means you owe them.
- Keep a running balance — A balance after every line makes mistakes visible the day they happen, not at month-end.
- Compare with the other side's statement — Your customer's ledger should mirror their supplier account for you. Send a statement of account and fix differences early.
- Correct with a new entry — Never overwrite history; post a reversing debit or credit with a note.
Limits — what Account Ledger does not do
- Account Ledger is a customer and supplier ledger, not double-entry accounting: it has no chart of accounts, journal entries, trial balance or financial statements.
- It does not connect to bank feeds or file taxes.
- In the US the app is on the App Store for iPhone; the Android version is on Google Play in Turkey only for now.
- It is a paid subscription after the free trial; the App Store shows current plans and prices.
Frequently asked questions
What is debit and credit in simple words?
They are the two sides of an accounting entry. A debit is written on the left and a credit on the right. Debits increase assets and expenses; credits increase liabilities, equity and income. Every transaction has equal debits and credits.
Is debit plus or minus?
It depends on the account. A debit is a plus for assets and expenses and a minus for liabilities, equity and revenue. A credit works the other way round.
Is a customer payment a debit or a credit?
In your books it is a debit to cash or bank and a credit to the customer's account, because the customer now owes you less.
What does a debit balance in a customer ledger mean?
The customer owes you that amount. It is the normal balance of a customer account. A credit balance means you owe the customer, for example after an overpayment or a deposit.
Why does my bank call a deposit a credit?
The bank statement is written from the bank's side: your money is a liability the bank owes you, and liabilities increase with a credit. In your own books the same deposit is a debit to cash.
What is an easy way to remember debits and credits?
DEALER: Dividends, Expenses and Assets increase with a Debit; Liabilities, Equity and Revenue increase with a Credit.
Is there an app for debit and credit entries?
Full accounting apps such as QuickBooks, Zoho Books and Wave post debits and credits for you. If you only need to know what each customer owes and what you owe each supplier, Account Ledger by Ofisx keeps a running-balance ledger per account on iPhone; it has a free trial and then a subscription.