Accounting – Definition – Debits n Credits

We shared if the ERP systems were based on the double entry system

I covered the concept of a double entry system in an earlier post

A double entry system is the standard and established method of recording accounting or financial transactions. This system is accepted worldwide. Each entry will be constructed in a manner that the total of all gives and  takes will be equal. This system takes into account both the sides of an accounting transaction.

I had referred to the give and take as the Debit and the Credit. These are two fundamental terms used in accounting.

The Merriam-Webster dictionary defines

debit as:

  • to take money from (an account)
  • to enter upon the debit side of an account :  charge with a debit
  • a record of an indebtedness; specifically :  an entry on the left-hand side of an account constituting an addition to an expense or asset account or a deduction from a revenue, net worth, or liability account
  • the sum of the items entered as debits
  • a charge against a bank deposit account
  • drawback, shortcoming

and credit as:

  • money that a bank or business will allow a person to use and then pay back in the future
  • a record of how well you have paid your bills in the past
  • an amount of money that is added to an account
  •  reliance on the truth or reality of something
  • the balance in a person’s favor in an account
  • an amount or sum placed at a person’s disposal by a bank
  • the provision of money, goods, or services with the expectation of future payment <long-term credit>; also :  money, goods, or services so provided <exhausted theircredit>
  • an entry on the right-hand side of an account constituting an addition to a revenue, net worth, or liability account
  • a deduction from an expense or asset account
  • any one of or the sum of the items entered on the right-hand side of an account
  • a deduction from an amount otherwise due
  • and more…..

I am sure this does not really help in understanding what a debit and a credit is, especially for newcomers to the accounting world….

So, how does one gain a concept to this?

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