Legal Definitions - debit

A debit refers to an amount of money that is owed, charged, or taken out of an account. It represents a reduction in a financial balance or an increase in an obligation. In the context of accounting, a debit is an entry that typically increases asset accounts (such as cash or property) or expense accounts, while decreasing liability accounts (like loans) or equity accounts.

• Example 1: Everyday Banking Transaction

  When you use your debit card to purchase a new book online, the cost of the book is a debit to your checking account. This means the amount is subtracted from your available balance, reducing the money you have in that account.

• Example 2: Monthly Utility Bill

  Your electricity provider sends you a monthly bill for the power you consumed. The total amount listed on that bill is a debit to your household's finances, representing the money you now owe to the utility company for their services.

• Example 3: Business Expense

  A small business purchases new office supplies from a vendor on credit. The invoice received from the vendor for these supplies creates a debit in the business's "accounts payable" ledger. This entry signifies an increase in the amount the business owes to its suppliers.