Debit and credit are two very important aspects of any financial transaction.

In financial accounting, debit represents the left hand side of Ledger and credit represents the right hand side of Ledger. Every transaction affects the two accounts simultaneously. One account will record a debit entry. It means amount will be recorded on the left side of that account. Another account will record a credit entry. It means amount will be recorded on the right side of that account. An important point to be noted is that Debit and Credit depend on the nature of the accounts involved. There are five types of accounts. 1. Assets- If assets increase, they are debited and if assets decrease, they are credited. 2. Expense- All the expenses have debit balance. If an expense in incurred, it must be debited. 3. Liability- Increase in liability is credited and decrease in liability is debited. 4. Income- All the incomes have credit balance. If an income is earned, it must be credited. 5. Capital- Capital has credit balance. Increase in capital is credited and decrease in capital is debited.