Money in, money out, made simple
If you have ever looked at a bank statement, you have seen debits and credits. These terms can be confusing, but they are simply a way to describe money moving in and out of your accounts. Understanding them helps you read your transactions, check your records, and make sense of your finances.
The Simple Explanation
Think of your bank account as a container that holds money. Money can either flow into the container or flow out of it.
- Credit (Deposit) - Money flowing INTO your account. Your balance goes up.
- Debit (Withdrawal) - Money flowing OUT of your account. Your balance goes down.
That is all there is to it. When you receive money, it is a credit. When you spend money, it is a debit.
Everyday Examples
Here are some common transactions and how they appear in your account:
Example 1: A customer pays you $500
You receive money, so your account balance increases. This is recorded as a Credit (Deposit) of $500.
Example 2: You pay $150 for office supplies
Money leaves your account, so your balance decreases. This is recorded as a Debit (Withdrawal) of $150.
Example 3: You transfer $1,000 from your personal account to your business account
Your personal account shows a Debit (Withdrawal) of $1,000 because money left. Your business account shows a Credit (Deposit) of $1,000 because money came in.
How They Appear in Officaid
In the Transactions tab of your account, you will see two columns:
- Debit/Withdrawal - Shows the amount when money goes out
- Credit/Deposit - Shows the amount when money comes in
Each transaction will show an amount in one column only. If money came in, you will see it under Credit/Deposit. If money went out, you will see it under Debit/Withdrawal.
How Your Balance is Calculated
Your account balance changes with every transaction:
- Credits (deposits) increase your balance
- Debits (withdrawals) decrease your balance
Example:
You start with a balance of $10,000. A customer pays you $5,000 (credit), and you pay a supplier $3,000 (debit). Your new balance is $12,000.
$10,000 + $5,000 - $3,000 = $12,000
Why This Matters for Reconciliation
When you reconcile your account, you compare your Officaid transactions with your bank statement. Both should show the same debits and credits.
If your bank statement shows a $500 debit on 15 June, your Officaid records should also show a $500 debit on 15 June. If something does not match, it could mean a missing record or an error that needs fixing.
Common Transactions in Officaid
Here is how different transactions appear in your accounts:
- Invoice payment received - Credit (money comes in)
- Expense paid - Debit (money goes out)
- Payable paid to vendor - Debit (money goes out)
- Other income received - Credit (money comes in)
- Loan received - Credit (money comes in)
- Loan repayment - Debit (money goes out)
- Internal transfer out - Debit (money leaves this account)
- Internal transfer in - Credit (money enters this account)
How Officaid Makes This Easy
You do not need to be an accountant to use Officaid. The system handles the complexity for you.
When you record a transaction in Officaid, whether it is an invoice payment, an expense, or a transfer, the system automatically creates the correct debit or credit entry in the right account. You simply enter the details of what happened, and Officaid does the rest.
This means:
- No manual calculations - Your balances update automatically
- No accounting knowledge required - Just record your transactions as they happen
- Fewer errors - The system ensures debits and credits are recorded correctly
- Easy reconciliation - Compare your records with bank statements in a few clicks
- Clear visibility - See exactly where your money is going at any time
Whether you are a business owner managing your own books or working with an accountant, Officaid keeps your financial records organised and accurate without the complexity of traditional accounting software.
Frequently Asked Questions
Go to your account and click on the Transactions tab. You will see all transactions listed with their amounts under either the Debit/Withdrawal or Credit/Deposit column.
When you pay for something, money leaves your account. This is a debit (withdrawal) and it is correct. Your balance will decrease by that amount.
Not in the same account. Each transaction in an account is either a debit or a credit. However, when you transfer money between accounts, you will see a debit in one account (money out) and a credit in another (money in).
What's Next?
Now that you understand debits and credits, explore these related guides:
- Navigating Your Account - View your transactions in the Transactions tab
- What is Bank Reconciliation and Why It Matters - Match your debits and credits with bank statements
- Adding an Internal Transfer - See how transfers create debits and credits in different accounts