Register now or log in to join your professional community.
A credit is an accounting entry that either increases a liability or equity account, or decreases an asset or expense account.
A debit is an accounting entry that either increases an asset or expense account, or decreases a liability or equity account. It is positioned to the left in an accounting entry.
Under double- entry system every business transaction is recorded in 2 or more accounts. one account will receive a debit entry,that means the amount will be entered on the left side of the account.
Another account will receive credit entry which means the amount will be entered on the right side of
the account.The initial challenge with double- entry is to know which account should be debited and which is credited
A debit is an entry on the left side of an account. For example, the account Cash is debited when cash is received. The account Cash will be credited when cash is paid out. (A credit is an entry on the right side of an account.)If a company's Cash account has $394,000 of debit amounts and $392,000 of credit amounts, the Cash account will have a debit balance of $2,000. Most asset accounts and expense accounts will have debit balances.If the Cash account had $394,000 of debit amounts and $395,000 of credit amounts, the Cash account will have a credit balance of $1,000. This indicates that it has a negative amount of cash—that the amount of checks written is greater than the money it has received. If a bank deposit is not made prior to its checks clearing the bank, the company's bank account will overdraw
Debit - an entry recording a sum owed, listed on the left-hand side or column of an account.
Credit - an entry recording a sum received, listed on the right-hand side or column of an account.
Lets have a look at following transactions
Simply
If you buy a phone by cash
So in this case "Phone" will be as debit and "Cash" will be credit.
Any asset coming to you will be debit and any asset going, will be credit.
If you need more details. you can ask.
Any Accounting Entry has two equal effects, Debit & Credit
Debits are Receiver, Expense & Assets
Credits are Giver, Income & Liabilities
The great word of accounting Debit and Credit was propounded by father of Accounting Luca Pacioli in his book “Summa de Arithmetica”. The book is also notable for including the first published description of the bookkeeping method that Venetian Merchants used during the Italian Renaissance, Known as the Double-entry accounting system.
Under the double-entry system every business transaction is recorded in at least two accounts. One account will received a ‘debit’ entry, meaning the amount will be entered on the left side of that account. Another account will receive a ‘credit’ entry, meaning the amount will be entered on the right side of the account. The initial challenge with double-entry is to know which account should be debited and which account should be credited.
Following rules are essential to know clear idea of debit and credit:
1. General Rules: In general rules we have to know the types of Account. The principle of Debit and Credit are also define with types of Account.
a. Real Account:
Debit- What comes in.
Credit-What goes out.
b. Personal Account:
Debit-Receiver.
Credit-Giver.
c. Nominal Account:
Debit-All Expenses and Losses.
Credit-All Income and Profit.
2. Equation Rules: This is familiar rules nowadays.
Nature of Account Debit Credit
Debit:
A debit is an accounting entry that either increases an asset or expense account, or decreases a liability or equity account. It is positioned to the left in an accounting entry.
Credit:
A credit is an accounting entry that either increases a liability or equity account, or decreases an asset or expense account. It is positioned to the right in an accounting entry.
Do you need help in adding the right keywords to your CV? Let our CV writing experts help you.
