To me, the easiest way to understand debits and credits on the income statement is to consider first how each transaction is impacting the balance sheet.

A few theories exist on the origin of the abbreviations for debit (DR) and credit (CR) in accounting. Both have Latin roots and can appear on a company's balance sheet.

Here's your cheat sheet Debits and credits can be a bit confusing. Sometimes a debit causes an account to increase, and other times it leads to a decrease. Credits are equally flexible.