Debit vs credit – The significant distinction in accounting

business bookkeeping services

You don’t know a lot of things when you initially start as a small business owner. You learn new things when managing clients, keeping your business bookkeeping services up to date, struggling to expand your brand reputations, and going through the ups and downs that come with starting anything new. Being a business owner is a never-ending learning process in which you learn something new every day.

Working as an accountant is beneficial when starting your firm. Accounting is a vital aspect, and you will struggle with it.

If you don’t have prior knowledge of accounting processes, it can feel like rocket science; there is an unending list of things you should know about accounting and tax services before you ace it; you can’t learn it in a day if you don’t have appropriate comprehension of it. But first, let’s discuss credit and debit, which are critical components of the accounting process.

 Debits vs Credits?

Before we get started on credit and debit, let’s take a quick look at the underlying accounting process: double-entry accounting. The primary distinction between credit and debit is that credit adds to your account while debit subtracts from it. Your double-entry accounting system is divided into several accounts. On your accounting system, you can see the accounts you’ve set up in your “Chart of Accounts.” So, whether money is coming in or going out, each transaction will be indicated by two ledger entries that balance each other out. This system is almost generally utilised, and it necessitates that each transaction involves two accounts (thus the double-entry name).

Let’s be clear: debits and credits can be puzzling to non-accountants.

What is a good example of debit vs credit?

Let’s take a simple example to see how debits and credits work. In this example, suppose you decide to buy $ 2,000 worth of goods for your business. This purchase is made in cash from the company’s bank account. 

 You must enter two entries for this transaction: debit and credit. When the inventory account is expanded, the debit is stored there (added inventory). As a result, the inventory account will be debited for $ 2,000.

How do fees and credits affect debt accounts? 

Inactive accounts need to be rethought. Accounts payable is a common example of a small business, although the debt accounts your business uses will depend on how it works. We are responsible for the balance of this account as it represents the amount to be paid to our suppliers and other vendors. 

Debiting a passive account has the opposite effect of debiting an active account. Since the inventory account is an asset, the $ 2,000 charge in the above case increased its value. On the other hand, if your $ 2,000 account is on the debit side of the ledger, the balance of that account is reduced.


As a business owner, we encourage you to expand your expertise in management account services. That said, I don’t want to get stuck in the back office, buried in paperwork. Instead, it is beneficial to be at the forefront of helping your business grow by providing useful products and services to your customers. 
 What steps can we take to achieve this vision? FinBridge is the right place. Our financial accounting outsourcing services help you save money while streamlining your processes. You don’t have to turn into an accounting issue because we’re by your side-just. Give us a book, and we’ll take care of the rest.