In accounting terms, what does "debit" refer to?

In accounting, a "debit" refers to an entry that increases assets or decreases liabilities and equity. This concept is fundamental to the double-entry accounting system, where every transaction affects at least two accounts and maintains the accounting equation: Assets = Liabilities + Equity.

When a debit is made, it generally signifies a positive entry for asset accounts, meaning that more resources have been added to the assets owned by the business. For example, if a company purchases equipment, this results in an increase in the equipment asset account, thus recorded as a debit.

Additionally, when liabilities or equity accounts are decreased, they are also recorded as debits. This means that if a company pays off a portion of its loan, it reduces the liability account, and that entry is likewise a debit.

This understanding of debits is crucial for accurately recording transactions and maintaining the integrity of financial statements.