05-05-2014, 05:24 PM
Debits and Credits
Credit and debit are the two fundamental aspects of every financial transaction in the double-entry bookkeeping system.
KEY POINTS
The English words credit and debit come from the Latin words credre and debere, respectively. Credre means "to entrust," and debere means "to owe".
In financial accounting or bookkeeping, "Dr" (Debit) indicates the left side of a ledger account and "Cr" (Credit) indicates the right.
The rule that total debits equal total credits applies when all accounts are totaled.
An increase (+) to an asset account is a debit. An increase (+) to a liability account is a credit.
Conversely, a decrease (-) to an asset account is a credit. A decrease (-) to a liability account is a debit.
It is important for us to consider perspective when attempting to understand the concepts of debits and credits.
credit
an entry in the right hand column of an account; credits increase liability, income, and equity accounts and decrease asset and expense accounts
debit
an entry in the left hand column of an account to record a debt; debits increase asset and expense accounts and decrease liability, income, and equity accounts
Credit and debit are the two fundamental aspects of every financial transaction in the double-entry bookkeeping system.
KEY POINTS
The English words credit and debit come from the Latin words credre and debere, respectively. Credre means "to entrust," and debere means "to owe".
In financial accounting or bookkeeping, "Dr" (Debit) indicates the left side of a ledger account and "Cr" (Credit) indicates the right.
The rule that total debits equal total credits applies when all accounts are totaled.
An increase (+) to an asset account is a debit. An increase (+) to a liability account is a credit.
Conversely, a decrease (-) to an asset account is a credit. A decrease (-) to a liability account is a debit.
It is important for us to consider perspective when attempting to understand the concepts of debits and credits.
credit
an entry in the right hand column of an account; credits increase liability, income, and equity accounts and decrease asset and expense accounts
debit
an entry in the left hand column of an account to record a debt; debits increase asset and expense accounts and decrease liability, income, and equity accounts