Difference between debit and credit
|
Difference between debit and credit
Credit is into your account, debit is out of your account.
Debit = left (represented by assets and expenses)
Credit = right (represented by liabilities, equity and revenue)
pready, why is my post innacurate. When banking, I debit my account and take out money, when crediting my account I put in money. So what is innacurate about that? For heavens sake, I have been banking since I was l6, I am now 66, give me a break!!
Anyone knows that who has a debit card for doing purchases in stores.
The OP didn't indicate it was an accounting question.
In Accounting there are what's called T-accounts for every account.
The T-account has three sections.
The account name goes above the T or in the top section.
The Debit is on the Left side or Section of the T.
The Credit is on the Right side or section of the T.
A Debit in an Asset or Expense Account Increases the Balance while a Credit Decreases the Balance
A Credit in a Liability, Equity, or Revenue Account Increases the Balance while a Debit Decreases the Balance.
Tickle,
In accounting a Debit is the left side of a T-account while a Credit is the right side of a T-Account.
For an example if your company receives cash for providing a service to a customer then the company will Debit Cash for the amount of Cash received and Credit Service Revenue for the amount Received.
If the Customer is a Business then they will Debit an Expense Account for the amount paid and Credit Cash for the amount paid.
In Accounting Debits equals Credits.
Thanks for the explanation, pready, much appreciated, but the OP is not saying it is an accounting issue. I do recognize your expertise from previous accounting issues though.
Tickle when you put money into a checking account the Bank credits your account because they owe you the money. In other words it is a Payable account to the Bank.
You would Debit the amount on your Books.
When the Banks makes a payment on your account they Debit their payable Account and you would credit your account.
Debit is on the left side of a T account, and that is the side were money or owners equity will go when you are adding to the company.
Credit is on the right side of a T account, and that is for if you are taking money away from the business.
A easy rule to learn Credit - Debit (entry)
WHAT COMES ON - DEBIT
WHAT GOES ON - CREDIT.
Example..- You bought a car for Rs. 180,000.00
simple. what comes to you i.e. CAR make it debit and what goes from your side is CASH, make it credit. now make entry
CAR... 180,000.00
... CASH... 180,000.00
Difference between debit and credit could be fully understood if you have a basic understanding of how accounting works. I'd recommend below article for you:
How accounting works
davide1982, this thread is from 2008. And that link is not a very good one because it's not actually teaching debits & credits (only vaguely mentions them at the end), and books don't use negatives for the credits like that. That's only going to confuse people... it's hard enough getting people to get the idea that charging something is not a negative to the payables account.
tickle, as long as someone dug up this old thread (and I wasted time reading it) - it's sort of obvious to me that the OP did mean it as an accouting issue. For one, no one would probably ever ask such a question if they were referring to their bank debit card. And second - it's in the Accounting forum. :-) (Granted, old thread and old issue.)
And pready, I think that's the first time I've ever seen anyone explain that whole debit/credit thing from the bank's side correctly. I really get tired of hearing that banks "do things backwards." I even hear accountants say that, which I find sad.
morgaine300, "teaching debits and credits" can't go separately without teaching double entry concept, assets-liabilities, income-expenditures... that's why I've advised that link. If you have you own way to explain what debits and credits mean, without even mentioning any other accounting principle I'd appreciate to see it)
A debit is the left side of a T-account and a credit is the Right side of a T-account.
An example is Depreciation:
Depreciation Expense account will have a Debit when you charge deprecian for equipment, and Accumulated Deprecian will have a corresponding credit.
When your Expense Accounts are closed your depreciation expense account will have a credit and your income summary account will have a corresponding Credit amount.
Notice this example does not involve cash at all!!
Difference between debit and credit.
There are three types of accounts.
Real Account: where the rule is DEBIT what comes in
CREDIT what goes out.
A real account is used for all assets
Nominal Account: Rule: DEBIT all expenses
CREDIT all Incomes or revenues
Personal account: Rule: DEBIT the receiver
CREDIT the giver.
Remember this hint : DEAD
D: Debit
E: Expenses
A: Assets
D: Debtors
CLIC:
C; credit
L: Liabilities
I: Income or revenues
C: Creditors
Did you read what I wrote. I did not say that explaining the double entry concept was not important. Nor did I say anything like "without even mentioning any other accounting principle..." Did I? You want to quote where I said or implied either of those things?Quote:
Originally Posted by davide1982
What I did say was that I thought the link was a bad example and that it might just serve to confuse people. I didn't say that everything it said was irrelevant -- I indicated what I thought was confusing about it. If you don't know what that was, reread my post. The link doesn't really explain debits & credits themselves at all. While you're stating that I think you can explain debits & credits without mentioning other accounting principles (which I never said), the link explains other accounting principles without explaining debits & credits. Get it?
Yes, I have my own way of explaining it, and I do know what generally confuses students, because I've been teaching it for 14 years. However, trying to thoroughly explain debits & credits in a post on a forum like this can be difficult. Since it's an old post, I'm not going to spend time answering the OP's question. As for explaining to anyone else, considering there's a lot to it, I'd rather address specific questions about it. I was addressing your post, not trying to answer the OP.
I had to read this whole thing again to get rid it off my profile. I hate math, but with on line banking I don't have to worry about balancing my cheque book anymore. I am not really that dumb, just challenged with numbers and too busy with other things like being a superhuman delivering healthcare to a few needy seniors and just hoping they are not going to pass away on me before I get to them. Long story, just visit the posts re 'socialized medicine'. Be happy and enjoy your weekend !
Tick
You do realize you just stuck in back into your profile again by answering it, right? LOL :-)
Yup, but thanks for the reply, morgaine !Quote:
Originally Posted by morgaine300
You wouldn't happen to be from the east coast US, would you ? Just curious
Best regards
Ms tickle !
No, from the midwest. Any reason you ask?
| All times are GMT -7. The time now is 02:43 AM. |