The Less Technical Explanation

Debit

· Think of it as a “negative” action, or the reduction of something.

· Makes sense that expenses are negative since they are reducing funds from your budget in order to pay for an item or service.

· Doesn't make sense to have a negative action occur in revenue b/c income is supposed to add to your budget.

o Except where the state reduces your revenue accumulation in order to pay for debt or interest.

Credit

· This of it as a “positive” action, or the addition of something.

· Makes sense that revenue is a credit because income adds to your ability to pay for things such as labor, services, and supplies.

· Doesn't make sense to have the addition of funds in an expense line of your budget.

o Except for a returned item which simply zero’s out the activity and doesn't produce a “credit” balance in the account.

o Similarly, a reduction of expense can occur when an outside entity is reimbursing you for out-of-pocket expenses in an E&G fund.