Let’s cut through the noise.
You open your first accounting class thinking, "Okay, this is probably like balancing a checkbook."
Then they throw “debit” and “credit” at you - but they don’t mean what you think.
If you’ve ever looked at a bank statement and assumed “debit = money out, credit = money in,” you’ve already made the first classic mistake.
And it’s not your fault.
Accounting uses “debit” and “credit” in a different - almost backward - way compared to your personal bank.
Let’s untangle it.
- Forget What You Think You Know
In everyday life:
- Debit card = paying for something
- Credit = getting money or points
In accounting? That logic will trip you up fast.
Debits and credits aren’t good or bad. They aren’t income or expense. They are two sides of every transaction.
Literally.
Accounting is based on double-entry bookkeeping - which means:
Every transaction affects at least two accounts, and one side is debited, the other credited. Always.
If you get that, you’re halfway there.
- Picture the T-Account
Let’s go old school - visual.
Cash
Debit | Credit
+ | -
A T-account looks like a T. Debits go on the left, credits on the right.
Now the key question: When do you debit, and when do you credit?
Answer: it depends on the type of account.
- Use the DEAD CLIC Rule (Yes, really)
There are many memory hacks, but here’s the one that actually sticks:
DEAD CLIC:
- Debit Expenses
- Assets
- Drawings
👉 These increase on the debit side.
- Credit Liabilities
- Income (Revenue)
- Capital
👉 These increase on the credit side.
So when you buy a laptop for your business (asset), you debit the Equipment account. When you take a loan, you're increasing a liability, so you credit Loans Payable.
It sounds mechanical now, but it becomes muscle memory fast.
- Here’s a Real Example (That Isn’t From a Textbook)
Let’s say you open a small freelance design business. You get paid $1,000 from a client by bank transfer.
What actually happens in your books?
- Cash (Asset) goes up = Debit Cash $1,000
- You earned Income = Credit Service Revenue $1,000
Now you spend $200 on software.
- Software Expense = Debit Expense $200
- Cash goes down = Credit Cash $200
Each of these entries has two sides. There is no such thing as a one-sided transaction in accounting.
- So Wait - Why Does My Bank Show Debits as Money Out?
Great question. Here’s the twist:
Your bank statement is from the bank’s point of view.
- When you deposit money, they owe you. You are their liability.
- So when you deposit, they credit your account (increasing a liability).
- When you withdraw, they debit your account (decreasing that liability).
The bank is accounting for what they owe you. That’s why debit = out, and credit = in… for them. Not for you.
- Common Mistakes to Avoid (I’ve Made All of These)
Here’s what tripped me up early on:
❌ Thinking debit = expense, credit = income
Nope. Assets can be debited too. Revenue is credited, but only because it increases equity.
❌ Mixing up personal banking with business accounting
As we said - they flip the script. Don’t base logic on your debit card.
❌ Forgetting that context matters
Debiting one account doesn’t mean the same thing in every situation. You have to look at the account type.
- When in Doubt: Ask What’s Going Up (and What’s Going Down)
Let’s simplify.
When you do anything - buy something, earn money, borrow, pay off debt - ask:
- What two accounts are affected?
- What’s increasing, and what’s decreasing?
- What kind of accounts are these? (Asset, Liability, Revenue, etc.)
- Then use DEAD CLIC to assign debit or credit.
Example: Pay rent in cash
- Rent Expense (Expense ↑) → Debit
- Cash (Asset ↓) → Credit
That’s it.
- Final Tip: Practice With Transactions You Actually Understand
Don’t start with textbook examples. Think about your own life:
- You get paid → debit cash, credit income
- You buy groceries with cash → debit food expense, credit cash
- You take out a student loan → debit cash, credit loan payable
Turn your own finances into T-accounts for a week. It clicks faster when the transactions are real.
TL;DR Summary (But Not Generic):
- Debits and credits are not about good or bad - they’re about account movement.
- Every transaction has two sides: one debit, one credit.
- Use DEAD CLIC to remember what increases on each side.
- Always ask: what’s changing? What kind of account is it?
- Ignore what your bank calls “debit” - it’s not about you, it’s their internal accounting.
