They are two sides of accounting entries where we use debit and credit for indicating increase or decrease in the details of accounting.
- Debit comes from the Latin word 'Debere' which means 'to owe'. Debit is commonly abbreviated as Dr in accounting transaction.
- Credit comes from Latin word 'Cedere' which means 'to believe'. Credit is commonly abbreviated as Cr in accounting transaction.
- One of the most important tool of accounting systems is the use of debits and credits.
Rules of Debit and Credit :
- In all accounts the debit is referred to the left column where increase in the debit makes decrease the credit column.
- Credit is referred to the right column where increase in the credit makes decrease in the left column.
- The total amount of debits must equal to the total amount of credits in the transaction otherwise the accounting transaction is said to be unbalanced.
Debit and Credit Usage :
Whenever we create an account at least two accounts are always impacted. One would be in debit entry and the other in the credit entry.
- Assets Accounts :
- The debit increase the value of the balance and credit decrease the balance.
- Liability Accounts :
- The debit decrease the value of the balance and credit increase the balance.
- Equity Accounts :
- The debit decrease the value of the balance and credit increase the balance.
- Revenue and gains :
- The debit decrease the value of the balance and credit increase the balance.
- Expenses and Losses :
- The debit increase the value of the balance and credit increase the balance.
Debit and Credit examples :
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