Double Entry System in Accounting: Debits & Credits Guide

If the words “debits” and “credits” sound like a foreign language, you are more perceptive than you realise — these two words have been traced back over five hundred years to a document describing today’s double entry system of accounting. For banking aspirants preparing for JAIIB, CAIIB and IIBF certifications in 2026, understanding this system is non-negotiable: every accounting question, balance sheet, and ledger entry you’ll encounter is rooted in it.

Under the double entry system, every business transaction is recorded in at least two accounts. One account receives a debit entry (amount entered on the left side), and another receives a credit entry (amount entered on the right side). The first challenge is knowing which account to debit and which to credit — and that’s exactly what this guide will help you crack.

Introduction to Debits and Credits

Before we illustrate debits and credits, let’s first understand the accounts in which these entries are posted. Without a clear grasp of what an account is, the debit/credit rules can feel arbitrary.

What Is an Account?

To keep a company’s financial data organised, accountants developed a system that sorts transactions into records called accounts. When a company’s accounting system is set up, the accounts most likely to be affected by its transactions are identified and listed out. This list is called the company’s chart of accounts.

Depending on the size of a company and the complexity of its operations, the chart of accounts may list as few as thirty accounts or as many as several thousand. A company has the flexibility to tailor its chart of accounts to best meet its needs.

Standard Order of Accounts

Within the chart of accounts, balance sheet accounts are listed first, followed by income statement accounts. The standard order is:

• Assets
• Liabilities
• Owner’s (Stockholders’) Equity
• Revenues or Income
• Expenses
• Gains
• Losses

Double Entry System Explained

Because every business transaction affects at least two accounts, our accounting system is known as the double entry system. You can refer to the company’s chart of accounts to select the proper accounts; new accounts may be added when an appropriate one cannot be found.

Everyday Examples

• Bank loan taken: When a company borrows ₹1,000 from a bank, the transaction affects the Cash account and the Notes Payable account.
• Loan repayment: When the company repays the bank, again Cash and Notes Payable are involved.
• Supplies for cash: The Supplies account and Cash account are affected.
• Supplies on credit: Supplies and Accounts Payable are affected.
• Rent paid: Rent Expense and Cash are involved.
• Service rendered on 30-day credit: Service Revenues and Accounts Receivable are affected.

Although the system is called “double-entry”, a transaction may involve more than two accounts. For instance, a loan EMI payment of ₹300 to the bank can touch three accounts: Cash, Notes Payable, and Interest Expense.

If you use modern accounting software (Tally, Zoho Books, QuickBooks or any of the cloud platforms popular in 2026), you may not always see both sides of the entry, since the software handles posting automatically. For example, when you write a company cheque through the software, it automatically reduces your Cash account and prompts you only for the other accounts affected — but under the hood, the double entry is still being made.

Rules of Debits and Credits

Once you’ve identified the two (or more) accounts involved in a transaction, you must debit at least one account and credit at least one account.

• To debit an account means to enter an amount on the left side.
• To credit an account means to enter an amount on the right side.

The DEAL Rule — Accounts Increased by a Debit

Generally, the following types of accounts are increased with a debit:

• Dividends (Draws)
• Expenses
• Assets
• Losses

Remember the acronym D – E – A – L when recalling accounts increased with a debit.

The GIRLS Rule — Accounts Increased by a Credit

Generally, the following types of accounts are increased with a credit:

• Gains
• Income
• Revenues
• Liabilities
• Stockholders’ (Owner’s) Equity

Remember G – I – R – L – S for accounts increased with a credit.

Decreasing an Account

To decrease an account, do the opposite of what was done to increase it. For example, an asset account is increased with a debit, so it is decreased with a credit. Similarly, a liability account is increased with a credit and decreased with a debit.

Quick note on abbreviations: The abbreviation for debit is Dr. and the abbreviation for credit is Cr.

Why Double Entry Matters for Bankers

For working bank professionals, the double entry system isn’t just an exam topic — it’s the foundation of every ledger, balance sheet and audit trail you’ll deal with in branch and head-office operations. JAIIB’s Accounting and Financial Management for Bankers paper and CAIIB’s advanced modules both assume you’ve internalised these rules. Master DEAL and GIRLS, and most numerical questions become mechanical.

Frequently Asked Questions

Q1. What is the double entry system in simple words?

It is an accounting method where every transaction is recorded in at least two accounts — one as a debit and the other as a credit — so that total debits always equal total credits.

Q2. Who is considered the father of the double entry system?

Italian mathematician Luca Pacioli is widely credited as the father of the modern double entry system, having documented it in 1494.

Q3. Can a single transaction affect more than two accounts?

Yes. For example, an EMI payment can touch three accounts — Cash, Notes Payable and Interest Expense — and the rule still holds: total debits will equal total credits.

Q4. What is the easiest way to remember debit and credit rules?

Use the acronyms DEAL (Dividends, Expenses, Assets, Losses — increased by debit) and GIRLS (Gains, Income, Revenues, Liabilities, Stockholders’ Equity — increased by credit).