The Importance of Debit and Credit in the Bookkeeping System


Importance of Debit and Credit

The terms debit and credit are two fundamentally important terms of accounting. The understanding of debit and credit is a basic prerequisite for being able to deal practically with booking on accounts and dealing with accounts. The debit and credit are the two sides of the account. The easiest way to enter the function is to use the simplified T account for exercise purposes. The terms debit and credit have no reference to the verbs and have in the normal language usage. These are special accounting terms for clarifying the account management. For the analysis of balance sheets, as well as for the preparatory accounting for the balance sheet and the preparation of the balance sheets, the knowledge of the meanings of the requirements is essential.

Dealing with debit and credit in the bookkeeping system

In order to learn the meaning and function of debit and credit, the T account should always be kept in mind. The name debit is on the left, the name credit is on the right side of the account.

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In the logistics of accounting, there are clear definitions of what should be posted under debit and what has to be posted in credit. In the book-keeping, the type of account is still relevant. If an amount is posted to a debit account, this is an expense. In the case of the active stock account, on the other hand, the debit posting affects the receipt of a payment. Have is on the right side of the account. If you have earned income, and you have a disposal in the credit account.

When the accounts are closed, the balance must be on the right side. However, only be possible on the basis of the passive range and the success rates. The reason is easily explained: There is no object in the value of zero in currency. Thus even in the case of an expense account, no habitual balance can arise.

For accounting purposes, the principles of accounting apply to the debit and credit for the respective type of accounts and the receipts and disposals from these accounts.

In the system of double-entry bookkeeping, at least one entry must be made for each entry on the debit side as well as on the credit side.