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
- 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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