Bookkeeping • 9 min read
Bookkeeping Basics Explained
Debits, credits, and the accounting equation in plain English.
Table of contents
The accounting equation
Assets = Liabilities + Equity. Every transaction, no matter how complex, keeps this equation balanced. If your books are out of balance, you have an error.
Debits vs credits
Debits increase assets and expenses; credits increase liabilities, equity, and revenue. The DEALER mnemonic (Dividends, Expenses, Assets increased by Debits; Liabilities, Equity, Revenue increased by Credits) is worth memorizing.
The bookkeeping cycle
Every period: record transactions → post to ledger → run trial balance → adjust entries → prepare financial statements → close the books. Repeat monthly.
Frequently asked questions
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