What determines whether the balance is a debit or a credit?

So, what’s the deal with debits and credits, huh? It always confused me at first, honestly. Like, is it just random? Turns out, it’s all about what kind of account you’re looking at. Think of it this way – my checking account, that’s an asset, right? Money in the bank. So a debit, adding money to it, makes that number go up. Makes perfect sense!

But then you get to things like, say, my credit card bill. That’s a liability – money I owe. A debit there would increase how much I owe… which is terrifying, right?! So a credit, a payment, is what makes that number shrink. It’s completely opposite! It took me ages to get that straight. I actually remember getting my first credit card and completely messing up my budgeting for the first few months because I didn’t understand this fundamental concept!

The basic rule, and this is what finally clicked for me, is that increasing an account’s normal balance makes the number bigger. So assets, expenses (because spending increases expenses, duh!), and dividends (money going out to shareholders) all go up with a debit. Liabilities, owner’s equity (because that’s like, your company’s savings, right?), and revenue are all increased by a credit. It’s almost like there’s this secret accounting language, once you crack the code though, it all starts to make a lot more sense. I found a great little YouTube video explaining it visually (I’m a visual learner, you know?). Maybe that’d help you too!