Debit vs Credit

Debit vs credit

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There are three basic rules of any transaction, namely that there should be more than one party, two, there is  free will and three there must be movement of money or money's worth. These three rules of the foundation of world trade and the economy. For our discussion, keep the first rule of utmost importance. Here's a little more on the debit vs. credit.

Debit Vs Credit: Terminology and Origin

We all know that accounting is a system where we write transactions in a disciplined and organized to keep track of finances and money. In the 15th century Venetian Bartolomeo Fra Luca Pacioli, better known as Luca Pacioli, the father of accounting, came with the basic mechanism of modern accounting, which we use today. Pacioli sets basic rules of accounting, which is known as the double entry system. The logic was pure and simple that any movement of money or a transaction has two sides, or the effects or both parties, the dual element is the basis accounting mechanisms. The flow rate conditions are two categories in which these transactions and money flows that are classified. In essence, both terms are invented names on both sides of the balance.

The origin of these concepts lies in the French and Latin. Here, flow, a word of French and middle debitum, a Latin word meaning "duty" or "what is owed," "speed", which we abbreviate as "Dr". In the opinion of many standard of record. Even the credit history or creditum, which means "that which is entrusted or loaned" or "trust or transfer" in Latin and European  languages, and is the abbreviation "CR". Although these terms are closely related to the payer and the recipient both have different meanings.

Debit Vs Credit: Technical Meaning

As mentioned above, debit and credit are two integral terms in trade. The mechanism of double entry system which is based on the difference between debit and credit, is still used around the world, even today, due to its success, the simplicity and pure simple logic. The only condition debit transactions compared to credit is that it must have more than one party and must have money or money's worth.

As mentioned above, Debit and credit are mere classifications of the transactions. There are 6 simple rules for these classifications. Often known as the golden rules, they go as follows:

•           Debit the receiver (personal account transaction)
•           Credit the giver (personal account transaction)
•           Debit what comes in (real account transaction)
•           Credit what goes out (real account transaction)
•           Debit all expenses and losses (nominal account transactions)
•           Credit all incomes and gains (nominal account transactions)

These six rules apply for all possible transactions and their use begins with the first step in the double entry system. The complete double-entry system is divided into four stages accounting process. The first is the log book. In this book, the two sides of a transaction is decided. The debit and credit has been decided at this point. For example:

Cash A/c...Dr
To Sales A/c...Cr

After this basic step is completed, the two goes to the ledger accounts. The sales ledger, cash Dr. element is done, and vice versa. There after the general ledger accounts transferred to a balance which is basically the sum of all species A / C. .. Dr. 's that have been made in recent months or years. The balance is then converted to a final account and balance sheet simple. The basic rule is that all expenses, losses and items coming out or what the company is charged and any other income or benefits or anything outside the company credited. And the credit vs debit in accounting, is very confusing at first, but once we have hold on it then it is quite simple.