In accounting, what do debits represent?

Debits represent the use of funds in accounting. When an account is debited, it indicates that resources are being utilized or that an asset is increasing. This concept is rooted in the double-entry accounting system, where every financial transaction affects at least two accounts, ensuring that the accounting equation (assets = liabilities + equity) remains balanced.

In practical terms, when cash is debited, it signifies that cash is being used to purchase goods, pay expenses, or invest in assets. This action contrasts with credits, which represent sources of funds or increases in liabilities and equity. Therefore, understanding that debits correspond to expenditure or the use of assets is fundamental for interpreting financial statements and the flow of money within a business.