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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.

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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. This is how your bank statement already reads: money leaving your account shows as a debit, money arriving shows as a credit.

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Your wallet is not the whole story

The everyday intuition and the accounting meaning part ways here. 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 is money it owes you, not something it owns. 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. The direction persisted on that balance answers it.

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Assets and liabilities: the two sides of the ledger

Each balance in a Ledger has a direction. 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 you define (BRL, USD, a loyalty point), the Ledger automatically keeps an external account named after it (@external/BRL, @external/USD). You can also define your own named external accounts.
Same R$100, two truths: it’s an asset in your wallet and a liability on the institution’s Ledger. Both are right. They are the two sides of the same movement. The outside world follows the asset side across the boundary.

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The iron rule: debits always equal credits

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. 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: 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 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 BankingSee what debit and credit mean from the ledger’s side in How money is recorded.

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Next steps

Next upDebits and credits only make sense as a pair. See how they work together in Double-entry bookkeeping.