The Definition of Debit and Credit | Why it’s Important to Users

The Definition of Debit and Credit | Why it’s Important to Users

Do you know where the words of debit and credit are coming from?

Accounting golden formula is debit and credit. If you want to know about accounting then you should know about the meaning of debit and credit. “Debits” and “credits” sound like an alien word to you. You are more to be known than you realize—”debits” and “credits” are words comes from five hundred years ago to a document. Dummies of debit and credit describing that have been traced back five hundred years to a document exemplify present-days double-entry accounting system.

History of Debit and credit

The history is well known to an accountant but it is the first beginning to use a terms 1494, Luca Pacioli’s books “Summa de Arithmetica Geometria proportioni et proportionalita”. Pacioli’s states one section of his books about transaction documentations in the double entry accounting system sections. Using this system which was benefited Italian merchant, traders, and bankers. In the modern time of bookkeeping this system is using a key formula.

Another thought is that its original Latin words from debere and credere which is used in Pacioli books. The word debere and credere actually come from the English word debit and credit. Inferior is that systems the abbreviation Dr. and Cr. is coming from Latin word. Each transaction has two sides. When assets and expenses are increased it is dr. and another side decreased its cr. On the other hand when capital, Income, and liabilities are increased its cr. and additionally when it is decreased Dr.

This abbreviation comes from English text. Pacioli’s actually is used “in dare” and “in havere” alternate of Dr. and Cr. He refers that dr. is left-hand side and cr. is right-hand side, now it is called payment and receipts such as salaries are paid to employee’s $300 .that transactions has two parts cash Dr. which is paid to an employer and salary cr. which is received by an employee.

debit and credit examples

What is debit?

Definition of a debit is a payment made or payment owed. When money is out of your account to make a payment, this is called debit.

  • Debit is left side amount.
  • Debit entries are made showing an increase in assets, a decrease in liabilities, etc.
  • Such an entry
  • The sum of such entries
  • A sum deducted from one’s bank account, as for a check
  • A disadvantage or shortcoming

What is credit?

Definition of credit is a cash receipt, or capital (investment amount of business). When the amount of money comes to your amount for services or goods provided, that is called credit.

  • Credit is right side amount.
  • Credit entries are made showing increase liabilities, a decrease in assets, etc
  • Such an entry
  • The sum of such entries
  • A sum including from one’s cash book account, as for cash payments.
  • An advantage or long coming   

All business transaction has two sides and two sides must be equal in accounts. This is the rule of double entry system in bookkeeping. The transaction maintains T- from which has two sides one is the debit (dr.) and another is credit (cr.).

In the journal entries, ledger accounts are to be valid. Each transactions total debit amounts must be equal in credit amounts. On the other hand in T-form of accounts left, hand side must be equal to right-hand side entries. In the appeal of multiple transactions in journal entries, both sides are must be equal. The amount in ledger balance is credit and this balance forwarding for next presiding months and it is gone to debit side in T accounts of the ledger. Then the final balance of ledger accounts goes to financial statements.

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