> ## Documentation Index
> Fetch the complete documentation index at: https://docs.lerian.studio/llms.txt
> Use this file to discover all available pages before exploring further.
# Debits and credits
> What debit and credit really mean in a banking system — the two ends of a money movement, and why one balance is a wallet to you and a liability to the ledger.
Two words trip up almost everyone the first time they read a banking system: **debit** and **credit**. They sound like accounting jargon, but they name something simple — the two ends of a money movement. A debit is where money comes **from**; a credit is where it **goes**.
## Debit is out, credit is in
***
Every movement of money leaves one account and arrives in another. Those two ends have names:
* A **debit** is the account money moves **out of** — the **source**.
* A **credit** is the account money moves **into** — the **destination**.
When you send R\$100 to a merchant, your account is **debited** (money out) and the merchant's account is **credited** (money in). One movement, two sides.
```mermaid theme={null}
flowchart LR
S["Your account
(source)"]:::debit
M(("Movement
R$100")):::bal
D["Merchant account
(destination)"]:::credit
S -->|"debit · R$100 out"| M
M -->|"credit · R$100 in"| D
classDef debit fill:#dbeafe,stroke:#2563eb,color:#1e3a8a
classDef credit fill:#fde68a,stroke:#d97706,color:#78350f
classDef bal fill:#f3f4f6,stroke:#6b7280,color:#111827
```
This is exactly how your bank statement already reads: money leaving your account shows as a debit, money arriving shows as a credit.
## Your wallet is not the whole story
***
Here's where the everyday intuition and the accounting meaning part ways — and it's the single most common source of confusion.
In your **wallet**, the math is obvious: money in is good, money out is less. When your bank says it **credited** your account, your balance went **up**; a **debit** took money away. So it's tempting to read *credit = add, debit = subtract*.
But that's your wallet's point of view. The **ledger** that holds your money sees the same balance another way. To the institution, your balance isn't something it owns — it's money it **owes you**. Whether a debit or credit grows or shrinks a balance depends on that balance's persisted direction, not account type alone.
So keep the two ideas apart:
* **Wallet thinking** asks: did *my* number go up or down?
* **Accounting thinking** asks: which account did this movement leave (**debit**), and which did it arrive in (**credit**)?
The accounting meaning is the reliable one, and it never changes: **a debit is the source, a credit is the destination.** Whether that raises or lowers a given balance is a *separate* question answered by that balance's persisted direction.
## Assets and liabilities: the two sides of the ledger
***
Each balance in a Ledger has a **direction**, and that direction — not an account category alone — decides whether a debit or credit changes its available amount.
In Midaz, a balance direction is `debit` or `credit`:
* A balance with direction **`debit`** increases its available amount on a debit and decreases it on a credit.
* A balance with direction **`credit`** increases its available amount on a credit and decreases it on a debit.
An account type can supply a default direction, but Midaz applies the direction persisted on the balance. For every **[asset](/en/midaz/assets)** you define — BRL, USD, a loyalty point — the Ledger automatically keeps an external account named after it (`@external/BRL`, `@external/USD`), and you can define your own named external accounts too.
Same R\$100, two truths: it's an **asset** in your wallet and a **liability** on the institution's Ledger. Both are right — they're just the two sides of the same movement. [The outside world](/en/fundamentals/core-banking/external-accounts-and-reconciliation) follows the asset side across the boundary.
## The iron rule: debits always equal credits
***
Here is what makes the whole system trustworthy: **total debits always equal total credits.** Every movement is recorded on both sides at once — the same amount out of the source and into the destination — so the two sides match exactly. If they don't, something is wrong, and the books say so.
Take that R\$100 payment. R\$100 leaves your account as a debit and R\$100 arrives in the merchant's account as a credit. One event, two entries, totals equal:
```mermaid theme={null}
flowchart LR
D["Your account
DEBIT R$100"]:::debit
C["Merchant account
CREDIT R$100"]:::credit
D --- BAL{{"Total debits R$100
= Total credits R$100"}}:::bal
C --- BAL
classDef debit fill:#dbeafe,stroke:#2563eb,color:#1e3a8a
classDef credit fill:#fde68a,stroke:#d97706,color:#78350f
classDef bal fill:#dcfce7,stroke:#16a34a,color:#14532d
```
The money didn't appear or vanish — it moved from one account to another, and the matching debit and credit prove it. This is the engine behind **double-entry bookkeeping**: every movement written down twice, once as it leaves and once as it arrives.
An **[operation](/en/midaz/operations)** is the smallest Midaz record of a balance effect. A non-pending transfer can produce a source debit and destination credit; pending or canceled flows can also include `ON_HOLD` or `RELEASE` operations.
**See also in Core Banking**
See what debit and credit mean from the ledger's side in [How money is recorded](/en/fundamentals/core-banking/double-entry-explained).
## In short
***
* A **debit** is the account money moves **out of** (the source); a **credit** is the account money moves **into** (the destination). That meaning never changes.
* Your **wallet** and the **ledger** read the same balance differently: to you it's your money; to the institution it's a **liability** — money it owes you.
* Which side a debit or a credit grows depends on the balance's persisted **direction**: `debit` increases on a debit; `credit` increases on a credit.
* **Total debits always equal total credits**, so money is never created or lost — it only moves.
**Next up**
Debits and credits only make sense as a pair. See how they work together in [Double-entry bookkeeping](/en/fundamentals/accounting/double-entry-bookkeeping).