Credits and debits come into play in double-entry or dual-entry accounting, a method by which each transaction is entered twice—once as a credit and once as a debit—on the balance sheet and/or the income statement. That’s how the financial statement stays in balance.
Credits always appear on the right-hand side of T accounts. They represent an increase in items such as business liability, owners’ equity, and revenue accounts, or a decrease in assets.
Debits are always listed on the left-hand side of T accounts. They represent an increase in asset and expense accounts, or a decrease in liabilities.