For common people who never studied proper accounting, the words debit and credit could be very confusing. When putting XXX amount in your personal bank account, the cashier tells," Your account is credited with the XXX dollars," furthermore, when you take out your cash YY from the account, the cashier tells," Your bank account is debited with YY dollars." It’s crucial to know the difference between in credit & debit, since everybody in the present time uses of debit & credit card machines.
Nevertheless, you need to forget whatever you might have learned about these 2 words, as in accounting language, debit defines a bank account whereas the cash your bank owes to you is credit.
In accounting, neither credits nor debits are considered as 'bad', since the 2 should be equal to one other & stable themselves ultimately at the conclusion of any calculation.
For each transaction that is recorded, whether it’s an amount put or a paid bill, in the accounting system, there must be 2 entries, one for credit and other one for debit. Such a system is called as 'double entry system’ in accounting. Hence, when the cashier at the bank tells he’s crediting XXX dollars in your bank account, he’s making a debit-entry for the same XXX money at the same time, although you’re not informed about that particular debit entry. Similarly, when the cashier debits your bank account by YY dollars, he creates a credit entry for that amount somewhere else.
The easiest way to learn about debits & credits in accounting is to understand what you gathered & from where did it originated. In accounting language, the thing you collect will be a debit, while credit will be from where you had it. For instance, you bought a television, using your credit card. The television will be the thing you’ve collected, means it’ll be debited in the world of accounting, whereas the credit is reproduced by the responsibility made in your credit card using an exactly identical sum.
Your deal with the bank might be very confusing when you consider these two terms. This is particularly true when you’re talking of accountabilities. The fact is, it’s not all that tough to learn. For instance, when you put money into your account, the responsibility of your bank to you rises by the sum which you’ve put, since the bank will owe you the money you’ve put. Now, all the responsibilities will be credits. Hence, the bank will credit your account with that much sum. Conversely, if you withdraw a particular sum of cash from your bank account, you’ll minimize the liability of your bank, hence the bank will debit the liability account.
In accounting, neither credits nor debits are considered as 'bad', since the 2 should be equal to one other & stable themselves ultimately at the conclusion of any calculation.
For each transaction that is recorded, whether it’s an amount put or a paid bill, in the accounting system, there must be 2 entries, one for credit and other one for debit. Such a system is called as 'double entry system’ in accounting. Hence, when the cashier at the bank tells he’s crediting XXX dollars in your bank account, he’s making a debit-entry for the same XXX money at the same time, although you’re not informed about that particular debit entry. Similarly, when the cashier debits your bank account by YY dollars, he creates a credit entry for that amount somewhere else.
The easiest way to learn about debits & credits in accounting is to understand what you gathered & from where did it originated. In accounting language, the thing you collect will be a debit, while credit will be from where you had it. For instance, you bought a television, using your credit card. The television will be the thing you’ve collected, means it’ll be debited in the world of accounting, whereas the credit is reproduced by the responsibility made in your credit card using an exactly identical sum.
Your deal with the bank might be very confusing when you consider these two terms. This is particularly true when you’re talking of accountabilities. The fact is, it’s not all that tough to learn. For instance, when you put money into your account, the responsibility of your bank to you rises by the sum which you’ve put, since the bank will owe you the money you’ve put. Now, all the responsibilities will be credits. Hence, the bank will credit your account with that much sum. Conversely, if you withdraw a particular sum of cash from your bank account, you’ll minimize the liability of your bank, hence the bank will debit the liability account.
