What is debiting

Debiting refers to the act of registering a financial transaction as a debit within the accounts of a business. Put simply, it indicates into which account the funds have been received or allocated.

To debit an account in accounting implies one of three scenarios:

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

The practice of debiting is an integral component of double-entry bookkeeping, a system that necessitates each transaction to be recorded in two accounts: one debit entry and one credit entry. These dual entries must balance, reflecting the fundamental principle that all assets are either financed by borrowing money (liabilities) or by paying money (equity).

Example of debiting

Consider a scenario where your business makes a purchase. This transaction should be recorded as a debit to an account reflecting the nature of the expense, due to the increase in the business’s costs. Concurrently, the payment is credited to the appropriate bank or cash account, representing the outflow of funds from the business.