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The first
time I have learnt accounting, the terms ‘debit’ and ‘credit’ can be
a bit puzzling. Debit is an amount entered on the left-hand side of
an account. Asset and expense accounts are amplified by debiting,
i.e. by entering amounts in the left-hand column. Credit is an
amount entered on the right-hand side of an account. Liability,
capital, and income accounts are enlarged by crediting, i.e. by
inflowing amounts in the right-hand column.
The
easiest method to shape out debits and credits in accounting terms
are to figure out the following:
what did
you receive, and where did it come from. The debit is what you
received, and the credit is where you received it from, in
accounting terms. So for expression sake, let’s suppose you
purchased a CD with your credit card. The CD is what you got, so it
will be a debit in the accounting world, and the credit will be
practical to the liability you take on your credit card for the
exact same amount.
The bank
can simply puzzle people learning about credits and debits in the
accounting logic of the terms, particularly when discussing
liability. For example, when you put cash in the bank, the bank’s
liability to you increases, and since liabilities are credits, they
are crediting your account. And when the bank lowers their liability
to us the banks are debiting the liability account, from an
accounting viewpoint.
If you
can shape these out for every transaction, then you’ve got the
accounting terms of credit and debit downward tap.
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