Everything looks backwards! A debits & credits overview

Jumping into the accounting world can be a bit scary. There are lots of new concepts to learn, and things may look a little backwards from you personal bank accounts until you get used to the new way of doing things. 

If you're looking at your reports and don't see what you're expecting, you can quickly check. The first step is knowing what should be a debit and what should be a credit.

When you connect your bank account to Wave, upload a statement, or manually enter transactions, you don't have to worry about debits and credits. Wave handles all of this for you.

If you want to make sure your transactions are correct, go to Reports and click Account Transactions (General Ledger). On this report, filter by bank account so you're only reviewing one account at a time. 

Asset accounts

Asset accounts include bank accounts like checking or savings:

  • Deposits are debits. On the transactions page, this will be a green transaction. 
  • Withdrawals are credits. On the transactions page, this will be a red transaction. 

Liability accounts

Loans and credit cards are liability accounts.

  • Received payments (transactions "paying off" your credit card) are debits. On the transactions page, this will be a green transaction.
  • Expenses/purchases are credits. On the transactions page, this will be a red transaction. 

What about transfers?

In Wave, when you move money from one account to another (like when you pay off your credit card), this is considered a transfer (learn more about how to create a transfer). The same debit & credit rules apply. If you move money from checking to pay your credit card, it will credit your checking account and debit your credit card.  

That's a pretty basic overview of debits and credits! If you want to dive into more detail, Accounting Coach has a great Debits & Credits Explanation.

Was this article helpful?
19 out of 28 found this helpful