Difference between debit and credit
Debit and credit are two common terms used in accounting to indicate increases or decreases in an individual's or organization's financial accounts.
Debit:
1. Debit refers to an entry that increases assets and expenses or decreases liabilities and equity.
2. Debit entries are recorded on the left side of an account and are usually represented by positive numbers.
3. Debit transactions include activities like cash withdrawals, purchases of goods and services, and payment of bills.
Credit:
1. Credit refers to an entry that increases liabilities and equity or decreases assets and expenses.
2. Credit entries are recorded on the right side of an account and are usually represented by negative numbers.
3. Credit transactions include activities like receiving payments from customers, investments, and loans taken out.
In summary, the key difference between debit and credit lies in their impact on financial accounts. Debit increases assets and expenses or decreases liabilities and equity, while credit increases liabilities and equity or decreases assets and expenses.