Debit and credit are two sides of a transaction. Debit is when money is taken out of an account, while credit is when money is added to an account. Debit cards are used to make payments directly from a bank account, while credit cards are used to borrow money from a financial institution and then pay it back with interest. When a person uses a debit card, the money is taken directly from their account. When a person uses a credit card, the charges are added to their account and they must pay it back with interest. Debit cards are often used for everyday purchases, while credit cards are more commonly used for larger purchases. Debit cards can also be used to withdraw cash from an ATM, while credit cards cannot.
Debit and credit can also refer to accounting entries. In this context, debit is an accounting entry that either increases an asset or expense account, or decreases a liability or equity account. Credit is an accounting entry that either increases a liability or equity account, or decreases an asset or expense account. Debit and credit entries must always be equal, meaning the sum of debits must equal the sum of credits in a transaction. This helps to ensure accuracy in accounting and to maintain the balance of the accounts.
