In accounting terms, what does 'debit' refer to?

In accounting, the term 'debit' is used to signify an increase in assets or expense accounts and a decrease in liability or equity accounts. When a company makes a debit entry, it is effectively recording an asset acquisition or an expense incurred, which reflects positively on the asset side of the balance sheet.

By increasing assets, such as cash or inventory, the company shows growth in terms of what it owns. Additionally, the phrase 'decreasing liabilities' indicates that the company is paying off debts or obligations, which positively impacts its financial standing. Therefore, the notion that debits increase assets while decreasing liabilities is a foundational principle of double-entry accounting, which ensures that each transaction is balanced and accurately reflects the financial status of an entity.