What are debits and credits in bookkeeping?

In bookkeeping, debits and credits are fundamental concepts used to record and track transactions in accounts. Debits refer to entries made on the left side of an account, while credits correspond to entries on the right side. This system is part of the double-entry bookkeeping methodology, which requires that every financial transaction affects at least two accounts in opposite ways—one being debited and the other being credited.

Understanding this distinction is crucial for accurately maintaining financial records. For example, if a company receives cash, it will debit the cash account (increasing it) while simultaneously crediting another account, such as revenue (where the income is recognized). This ensures that the accounting equation (Assets = Liabilities + Equity) remains balanced.

The other options do not accurately reflect the definitions of debits and credits. For example, stating that debits are entries on the right side and credits on the left is incorrect as it reverses their actual positions in the accounting framework. Similarly, defining debits as positive and credits as negative oversimplifies the concept, as the effect on the accounts varies depending on the type of account in question. Lastly, the idea that debits and credits both represent increases in accounts is inaccurate, as debits may increase assets and expenses,