Debits and Credits

words that have been traced back five hundred years to a document describing today's double entry
Under the "double-entry system" -- every business transaction is recorded in at least two accounts.
One account will receive a debit entry, meaning the amount will be entered on the LEFT side of that acco
Another account will receive a credit entry, meaning the amount will be entered on the RIGHT side of th

What is an Account?
To keep a company's financial data organized, accountants developed a system that sorts transactions in
A classification to which an item is being grouped into.

The initial challenge with double entry is to know which accout should be debited and which account sho
Generally these types of accounts are increased with debit (destination):
D Dividends (draws)
E Expenses
A Assets
L Losses

Generally these types of accounts are increased with credit (source):

G Gains
I Income
R Revenues
L Liabilities
S Stockholder's (Owner's) Equity

Misconception
debits and credits are neither Good nor Bad
Debits and credits are not the same as adding or subtracting

Rather, Words used to reflect the duality or double-sided nature of all financial transactions
Can use coin as example since they have equal sides where Head/debits and Tail/Credits
In a world of finance, money does not magically appear or disappear.

For Money to got One

It has to come out from Another
Account

Accountants consider every transaction to involve flow of "economic benefit" from a source to destination
Economic benefit is the potential for an asset to contribute either directly or indirectly to the flow of an e
Source= credit
Destination = debit
Accounting Equation
Credit

Assets = Liabilities + Equity

tricky one to expand it to the components that make it up

Debit
y's double entry
two accounts.
d on the LEFT side of that account.
ntered on the RIGHT side of that account.

stem that sorts transactions into records whch is called ACCOUNTS.

debited and which account should be credited.

ed with debit (destination):
business distributes some of it's cash to it's owners
A business pays a third party for goods or services provided
cash, buildings and amounts owed to you by others

ed with credit (source):

such as amounts owed to the bank in exchange for loan

Where business owners gives cash to the business

source to destination
or indirectly to the flow of an entity's cash.
t make it up
Debits and Credits

Misconception
debits and credits are neither Good nor Bad
(put joke on debit plus credit equals
Debits and credits are not the same as adding or subtracting Kupit)

Rather, words used to reflect the duality or double-sided nature of all financial transactions

words that have been traced back five hundred years to a document describing today's double entry
Under the "double-entry system" -- every business transaction is recorded in at least two accounts.

WE/Accountants consider every transaction to involve flow of "economic benefit" from a source to destination
Economic benefit is the potential for an asset to contribute either directly or indirectly to the flow of an
entity's cash.

In a world of finance, money does not magically appear or disappear.

It has to come
For Money to got
out from
One Account
Another

(destination) (source)

The initial challenge with double entry is to know which accout should be debited and which account should be
credited.

What is an Account?
To keep a company's financial data organized, accountants developed a
system that sorts transactions into records whch is called ACCOUNTS.
A classification to which an item is being grouped into.

Accounting Equation
Credit

Assets = Liabilities + Equity

Debit tricky one to expand it to the components that make it up

Generally these types of accounts are increased with debit (destination):

D Dividends (draws) where business distributes some of it's cash to it's owners

E Expenses A business pays a third party for goods or services provided

A Assets cash, buildings and amounts owed to you by others

L Losses extracting less money from a transaction than one put into it.
(Revenue is lower than Expenses thus equals to loss)

Generally these types of accounts are increased with credit (source):

G Gains opposite of loss
Money received by individuals, firms and other organizations
I Income in the form of wages, salaries, rent etc
amount of money a company earns through the sale of goods
R Revenues or services, rents and other sources
L Liabilities such as amounts owed to the bank in exchange for loan
Stockholder's (Owner's)
S Equity Where business owners gives cash to the business

Tips:
Debit means left
Credit means right