Definition of Debit (Accounting and Legal)

Debit in accounting is the side recorded on the left side of an account, which increases balances of asset and expense accounts, and decreases balances of liability, revenue, and equity accounts. From a legal perspective, a debtor is a natural or legal person who has a financial obligation toward another party (creditor), whether this obligation arises from a contract, loan, or any other legal obligation.

The fundamental difference is that the accounting concept is technical related to recording entries, while the legal concept focuses on contractual relationships and obligations between parties.

Difference Between Debit and Credit in Accounting

The difference between debit and credit in accounting lies in the two sides of accounts and their effect on balances. Debit is the left side of an account and increases balances of assets and expenses while decreasing balances of liabilities, revenues, and equity. In contrast, credit is the right side of an account and works in exactly the opposite way, increasing balances of liabilities, revenues, and equity while decreasing balances of assets and expenses.

The basic rule in accounting requires that the total debits equal the total credits in every accounting entry to ensure accounting balance.

Nature of Debit Accounts

Debit accounts by nature represent uses and applications of funds, including assets and expenses. These accounts increase with entries on the debit side and decrease with entries on the credit side. Debit accounts reflect what the company owns in resources or what it spends in pursuit of its business objectives.

Simple Example

When purchasing equipment for 20,000 SAR in cash:

• Equipment account (asset) becomes debited for 20,000 SAR
• Cash account (asset) becomes credited for 20,000 SAR