In simple terms, a debit is an entry that records money leaving an account (like a purchase), while a credit records money entering an account (like a deposit)
How money actually moves
When you swipe your debit card for groceries, your checking account gets debited and the grocery expense account gets credited — that’s cash flowing out. On the flip side, when your paycheck hits your account, the bank balance is credited while the payroll expense account is debited, showing money coming in. Generally, this double‑entry approach, noted by Investopedia and IRS Publication 334, means every transaction touches at least two accounts so the books stay balanced. (Honestly, it’s pretty neat how the system self‑checks.)
Step-by-Step Reconciliation
Reconciliation matches your bank statement to your records by comparing debits and credits
First, grab your monthly statement as a PDF from the bank’s app or website. Open a spreadsheet and set up columns for Date, Description, Debit (−) and Credit (+). Then, copy each transaction’s date, description, and amount into the right column — use a minus sign for debits and a plus for credits. Add up each column; if the totals match, your records are in sync. The Consumer Financial Protection Bureau actually recommends this as a quick way to catch unauthorized charges or bank errors — it's really helpful.
