Debit originated from the Italian word debito, which in turn is derived from the Latin word debeo, which means ‘owed to proprietor’ and credit comes from the Italian word credito, which is derived from the Latin word credo, which means belief, i.e., ‘owed by proprietor’. According to the dual aspect concept, all the business transactions that are recorded in the books of accounts have two aspects- debit and credit. 

The dual aspect can be better understood by the help of an example; bought goods worth Rs. 500 on cash. This transaction affects two accounts with the same amount simultaneously. As goods are brought in exchange of cash, so the cash balances in the business reduce by Rs 500, i.e. why the cash account is credited. Simultaneously, the amount of goods increases . by Rs 500, so purchases account will be debited. Debit and credit depend on the nature of accounts involved; such as assets, expenses, income, liabilities and capital. There are five types of Accounts.

Two fundamental rules are followed to record the changes in these accounts:

For recording changes in Assets/Expenses (Losses) 

a. “Increase in asset is debited, and decrease in asset is credited.” 

b. “Increase in expenses/losses is debited, and decrease in expenses/ losses is credited.” 

For recording changes in Liabilities and Capital/ Revenues (Gains): 

a. “Increase in liabilities is credited and decrease in liabilities is debited ” 

b. “Increase in capital is credited and decrease in capital is debited.” 

c. “Increase in revenue / gain is credited and decrease in revenue/gain is debited.”