02-15-2008, 07:32 PM
<b>Answer 1</b> There is no universal definition of debit and credit.
<b>Debit</b> An accounting entry which results in either an increase in assets or a decrease in liabilities on a company's balance sheet or in your bank account.
<b>Credit</b> An accounting entry system that either decreases assets or increases liabilities.
The best way to understand debits and credits is to identify two components of each transaction 1) what did you receive; and, 2) where did it come from. The debit is what you received, and the credit is the source of the item or service you received. For instance, imagine that you purchased a computer with your credit card. Since the computer is what you got, it's going to result in a debit to the asset account for your computer. The credit will be applied to the credit card liability account for the same amount also as a result of this purchase.
<b>Answer 2</b>
When an expense is incurred by a business, it must ultimately be paid for and the payment of the expense would result in the decrease of the âCapitalâ.
And...
The Increase in Capital is a CREDIT; while the Decrease in Capital is a DEBIT.
Hence an expense is to be DEBITED.
Hope that helps!
<b>Debit</b> An accounting entry which results in either an increase in assets or a decrease in liabilities on a company's balance sheet or in your bank account.
<b>Credit</b> An accounting entry system that either decreases assets or increases liabilities.
The best way to understand debits and credits is to identify two components of each transaction 1) what did you receive; and, 2) where did it come from. The debit is what you received, and the credit is the source of the item or service you received. For instance, imagine that you purchased a computer with your credit card. Since the computer is what you got, it's going to result in a debit to the asset account for your computer. The credit will be applied to the credit card liability account for the same amount also as a result of this purchase.
<b>Answer 2</b>
When an expense is incurred by a business, it must ultimately be paid for and the payment of the expense would result in the decrease of the âCapitalâ.
And...
The Increase in Capital is a CREDIT; while the Decrease in Capital is a DEBIT.
Hence an expense is to be DEBITED.
Hope that helps!
