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Debit and Credit do no have a meaning. They are just two sides of accounting entries, rather signals to indicate whether something has gone up or down. Contrary to the belief that Debit means incoming and Credit means outgoing, they are just signals to indicate whether the accounting elements (assets, expenses, liabilities, equity and revenue) has increased or decreased. For e.g. If you buy an asset, there is an increase in assets so you communicate or signal it by debiting it.
Just as when we hold our index and middle finger in a V shape, it signals victory, similarly debiting assets and expenses signals an increase, and crediting liabilities,revenue and equity signals an increase in them.
I have sample answer , Debit means the one who take , Credit means the one who Give . i wish every accountant understand that way , even if i handover to my stuff or any new Juniors MUST let them know in sample answer to make the diffrence between Dr.& Cr.
Debts That what we owe, which we can claim or in simple which belongs to us.
Credits that is claimed by others and they owe in simple belongs to others and we have to return or pay or we have to bear and many more terms like these.
Example
Debtors
They have to pay us and what they have to pay that belong to us.
Assets
That belongs to us
Creditors
We have to pay them because it belongs to them.
If we have to pay for some purchases
Entry will be
Purcahses Dr
Bank Cr
In this purchases the stock we bought belong to us so its debit and money against the stock is now belongings of others so we have to pay so it is credit entry
Debit and Credit are formal bookkeeping and accounting terms that have opposite meanings and come from Latin. Debit comes from debere, which means "to owe". The Latin debitum means "debt". Credit comes from the Latin word credere, which means "to believe".
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Debit is abbreviated Dr., while credit is abbreviated Cr.
"Debit" also refers to the left side of a general ledger account, while "Credit" refers to the right side. _____________________________________________________________________
A debit is also (informally) referred to as a "charge." A debit or credit changes the balance of an account. Asset and expense accounts increase in value when debited and decrease when credited, whereas liability, equity, and revenue accounts decrease in value when debited and increase when credited. This distinction is somewhat counterintuitive, until the nature of those accounts is more closely scrutinized. For example, revenue is coded as a credit. After recording a day's sales, the company will have credited a certain amount in revenue, and since credits are negative numbers, the balance grows more and more negative. An adjustment to revenue would need to be a debit, because its purpose is to bring the revenue totals closer to zero. __________________________________________________
It is often assumed that a debit decreases a balance, and a credit increases it, because this is how the terms are used on bank statements and using a debit card decreases the balance in one's bank account. However, this is because bank statements are traditionally written from the bank's perspective, where the customer's account is a liability. By withdrawing money, the customer is decreasing the bank's liability. Since liability accounts normally have a credit balance, the withdrawal of cash from a banking account is reflected on the bank's balance sheet as a debit.
In Accounting (Dr) means come in, and Cr means goes out.
Expences are always Dr
Payments are Cr
Assets Are Dr and Liabilities Are Cr
Exmple: Telephone bill Paid
entry will be
Telephone expences Dr
Cash/bank Cr
This is the set of rule to denote the impact of any financial transaction on financial accounting.
When applying the double-entry bookkeeping system to a financial transaction that involves the Cash at Bank account of a business, you would enter an amount as DR (debit) if the financial transaction increased the amount in the Cash at Bank account and enter the amount as CR (credit) if the financial transaction decreased the amount in the Cash at Bank account.The theory goes - if you increase an asset (i.e. cash at bank) you DR and if you decrease an asset you CR.Since the bank keeps their financial records from their point of view, they would record your financial transaction in reverse order with your account being CR when you add to it and DR when you make a withdrawal. This is because your deposit increases their liability to you and your withdrawal decreases their liability to you. From the bank's point of view, the theory goes, when a liability increases you CR and when a liability decreases you DR.
it means the cash flow or in one word accounts.Note (debit+ credit=balance)the simple meaning of accounting
The Basics:Debit = An entry that increases an asset or decreases a liabilityCredit =An entry that increases a liability or decreases an asset
All companies use the "double-entry system", meaning that every credit entry is followed by a corresponding debit entry, thereby always keeping the balance between asset and liability accounts.
Income and expenses are transferred into the Profit & Loss (P&L account), reflecting the operative results, dividends etc.
= The total of all debit and credit accounts must be equal to the total of all credit balances.
The abbreviation for debit is dr. and the abbreviation for credit is cr, associated with the Latin or Italian word used more than500 years ago when double entry accounting was first documented.
All expense are always Dr
and all income are always CR
Increase in Asset Dr
Decrease in Asset Cr
Increase in Expense Dr.
Decrease in Expense Cr
Expences are always Dr
Payments are Cr
Assets Are Dr and Liabilities Are
