What is debiting

Debiting involves noting a financial transaction as a debit in a business’s accounts, showing which account has either received or sent out money.

Debiting an account can mean one of three things:

• An increase in assets
• An increase in expenses
• A decrease in liabilities

Double-entry bookkeeping, which requires each transaction to be recorded in two accounts—one for credit and one for debit—is the practice of debiting. These two entries, which represent the essential idea that all assets are either financed by paying money (equity) or by borrowing money (liabilities), must balance.

Example of debiting

Imagine that your company decides to make an acquisition. Because the costs of the firm are increasing, this transaction should be documented as a debit to an account that accurately reflects the nature of the charge. Simultaneously, once the money leaves the company, the payment is credited to the relevant bank account or cash account.