cancel
Showing results for 
Search instead for 
Did you mean: 

Debit and credit

Former Member
0 Kudos

Hi,

Could any one please define debit and credit.

And when are various type of accounts either debited or credited?

Please provide woth an example if possible.

Thanks

Best Regards

D. Swathi

Accepted Solutions (0)

Answers (7)

Answers (7)

Former Member
Former Member
0 Kudos

Hi,

Thanks for the Information. Could u please justify the rules w.r.t the definitions of debit and credit.

Eg: DR what come in and CR what goes out

A/c the def given, Dr means (something owe to pay/ loss) and Credit means (to rightful to receive/Gain).

Thanks

Best Regards

D. Swathi

former_member188826
Active Contributor
0 Kudos

<a href="http://www.accountingcoach.com/online-accounting-course/07Xpg01.html">If the words "debits" and "credits" sound like a foreign language to you,</a> you are more perceptive than you realize—"debits" and "credits" are words that have been traced back five hundred years to a document describing today's double entry accounting system.

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 account. Another account will receive a "credit" entry, meaning the amount will be entered on the right side of that account. The initial challenge with double entry is to know which account should be debited and which account should be credited.

Before we explain and illustrate the debits and credits in accounting and bookkeeping, we need to get an understanding of the accounts in which the debits and credits will be entered or posted.

Former Member
0 Kudos

Hi Swathi,

In whole accounting process, we classify all accounts as

1. Nominal Accounts (For exp and Rev)

2. Real Accounts (For Assets)

3. Personal Accounts (Credit sales and Credit pur)

Hi Dr means (something owe to pay/ loss) and Credit means (to rightful to receive/Gain). The account rukles are as follows for the above account classes 1, 2 and 3.

1. Dr all expenses and loss and cr all revenue and gains

2. Dr what Comes in and Cr what goes out

3. Dr the receiver (the credit buyer/AR) and Credit the Credit seller (AP)

These rules universally apply.

Do you think this reply deserves points?

decide

Regards

Bharat

Former Member
0 Kudos

Well, this issue is not so simple. There are rules for debiting and crediting, depending on the account (assets or liabilities) and you have to lern them...I'll try to give you an example:

- as main rule, the left side of an accounting note is called "debit" an the right one is called "credit";

- an accounting note shows like that:

sum/ value debit account = credit account sum/ value

- suppose you buy some goods from a supplier and you have to pay them after 30 days; the goods value is 1000 eur;

- when you receive the goods and the invoice, the accounting note is:

1000 goods account = vendor account 1000, meaning that your stock increased an your debt for the vendor increased, too, with 1000 eur (goods account was debited and vendor account was credited);

- after 30 days, when you pay the debt to the vendor, you will have:

1000 vendor account = bank account 1000, meaning that your debt to the vendor increased with 1000 eur and the money from your bank increased with 1000 eur, too( the vendor account was debited and his balance is 0 and the bank account was credited).

Hope it helps and please assign points!

Former Member
0 Kudos

sorry, in the second case, when you pay the vendor 1000 eur, please read "your debt decreased with 1000 eur", because I have written wrong.

Former Member
0 Kudos

Hi ,

These are the basics of accountancy.I believe the below page would give you sufficient explainations with examples.

http://en.wikibooks.org/wiki/Accountancy/Introduction_to_Accountancy

Please let me know if this helps.

Regards

Former Member
0 Kudos

Hi,

Thanks for the information.

Could you please explain how shd a Dr or CR entry be made for a transaction.

For eg: I purchase raw materials , on cash .

Now what are all the entries made for this transaction and how shd this be decided that i make a debit or credit entry ?

Thanks

Best Regards

D. Swathi

Former Member
0 Kudos

Hi,

Debit and Credit are balancing entries which plays vital rols in document posting. In SAP we have verious posting keys to hadle these Debit and credits.

Suppose if we make customer invoice

Dr Customer

Cr Sales

Suppose if we get payment from customer

Dr Bank

Cr Customer

Suppose if we make Goods receipt

Dr Stock

Cr GR/IR A/c

Suppose if we make Invoice Receipt

Dr GR/IR

Cr Vendor

Suppose if we make payments as salaries to employees

Dr Salaries

Cr Bank/Cash

Hope this clarifies

Regards

Balaji