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A debit is an entry on the left side of an account. For example, the account Cash is debited when cash is received. The account Cash will be credited when cash is paid out. (A credit is an entry on the right side of an account.) If a company's Cash account has $394,000 of debit amounts and $392,000 of credit amounts, the Cash account will have a debit balance of $2,000. Most asset accounts and expense accounts will have debit balances. If the Cash account had $394,000 of debit amounts and $395,000 of credit amounts, the Cash account will have a credit balance of $1,000. This indicates that it has a negative amount of cash---that the amount of checks written is greater than the money it has received. If a bank deposit is not made prior to its checks clearing the bank, the company's bank account will overdraw.
Which is going out is credit Which is coming in is debit
The difference is on their side, or to say that they are on opposite sides (as at the balance left and right sides).
Credit Means Amount Will Addition in Your Account, Debit Means Amount will Deducted From Your Account. in Short Cr and Dr.
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Debit and Credit are simple rules in our accounting system. Basically their purpose is to record transaction into the ledger. As in mathematics we use Plus and Minus similarly in accounting we use debit and credit. In terms of accounting equation where Assets = Liabilities + Owner's Equity then when asset increases we debit it and when liabilities and owners equity increaases we credit both of these. Similarly all expenses are debited and revenue is credited.
To undserstand Debit and Credit you need to understand the golden rules of accounting.
There are3 golden rules or types of accounts. These are:-
PERSONAL ACCOUNT – These are accounts of parties with whom the business is a carried on. Personal accounts may be:
Rules of Accounting:
Debit the Receiver
Credit the Giver
Real Account – These are asset accounts that appear in the Balance Sheet. They are referred to as Real Account (or Permanent Accounts) as these are owned by businesses and the balances in these accounts at the end of an accounting period will be carried over to the next period. Ex: Cash Account, Land Account, Building Account etc.
Rules of Accounting:
Debit what comes in
Credit what goes out
Nominal Account – These are accounts of expenses and losses which a business incurs and income & gains which a business earn in the course of business. Ex: Rent Account, Interest Account.
Rules of Accounting:
Debit all expenses and losses
Credit all income and gains
A given party is credit
A received party is debit
Coming To You is Debit ( Credit For2nd Party)
Going From You Is Credit ( Debit For1st Party)
If the transaction is related to one of the working capital accounts we use debit with the side who receive and we use credit with the side who give.
If the transaction is related to assets we use debit when the account grow up and credit when the accounts declines.
If the transaction is related to temporary accounts, we use debit with the expenses and credit with the revenues.
Debit is the left side of the ledger a/c or when something has been deducted from the account. Credit means right side of the ledger a/c or when something has been added. Every debit is equal to every credit.
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Asalamualikum...............so many people will give the answers debit the receiver and credit the giver or else debit what comes in and credit what goes out.......but for a non commerce student it hard to understand the debit and credit........in simple terms what are all postings of ur left hand side are called debit and what are on right hand side postings are called credit.........what ever the a/c may be ledger a/c,trialance balnce a/c......etc
