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Correction
Debit and credit are neutral accounting directions. Debit means left, and credit means right. Neither word says whether a transaction helps or hurts the company.
Why the wrong answer seems reasonable
Outside accounting, credit can suggest a strong credit score or money added to a bank account. Debit can suggest a card payment or money taken away. Accounting uses the same words for the two sides of every account, without that favorable or unfavorable meaning.
Where it goes wrong
Harbor Design, a design-services corporation, receives $6,000 before providing 6 months of customer support. The entry debits Cash and credits Unearned Revenue. The debit increases an asset, while the credit increases Unearned Revenue, the liability for support still owed. Calling the credit “good” would hide the service Harbor Design still owes.
The direction reverses when Harbor Design pays a supplier. Harbor Design debits Accounts Payable to reduce the liability and credits Cash to reduce the asset. The debit does not describe a loss, and the credit does not describe a benefit.
Check your answer
Look for words such as good, bad, favorable, or unfavorable in an explanation of debit and credit. Those words do not identify the account class, the normal balance, or the direction of change.
What to do instead
First use the account class and change direction to choose debit or credit. Then discuss the business effect separately. For example, receiving customer cash may make more cash available now while also increasing a liability for work the company has not performed.
When this mistake may appear
- Someone has seen debit cards, credit scores, or bank-statement debit and credit labels.
Your work may contain this mistake if:
- The explanation calls a credit favorable or a debit unfavorable without naming the account.
- The answer avoids a debit because it sounds like a loss or cash payment.