Debits and Credits Homework Help

The Credit and Debit are the two fundamental aspects of every financial transaction in the accounting system or the double entry bookkeeping system in which every debit transaction must have a corresponding credit transaction and vice versa. Debit is an accounting entry which results in either an increase in assets or a decrease in liabilities on a company’s balance sheet. A debit on an accounting entry will have the opposite effects on the balance depending on whether it is done to assets or liabilities with a debt to assets indicating an increase and vice versa for liabilities.

Credit is an accounting entry which either decreases the assets or increases the liabilities and equity on the company’s balance sheet. Credit can also be referred as the term used for the borrowing capacity of an individual or company. In simple terms, Credit is the ability to buy something with the promise to pay it later, whereas the Debt is what somebody has and pays the amount at the same time the purchases being paid or the credit is being paid. For example, ABC has a MasterCard with $5000 credit limit and buys goods of worth $500 on her MasterCard. ABC has then left with $4500 credit and $500 debt which needs to be paid back. In an account statement, Debit (Dr) means the left side of the ledger account and the Credit (Cr) is the right side of a ledger account. To find the debit or credit on a specific account can be done for any of the three different accounts: a) The Real accounts, b) The Personal Accounts and c) The Nominal Accounts. If there is an increase (+) to an asset account it is a debt, whereas an increase (+) to a liability account is a credit. Also, a decrease (-) to an asset account is a credit and a decrease (-) to a liability account is a debt.

The Debit and Credit are the two opposing aspects of every financial transaction which are relevant to the process of accounting. An element or account which is affected by an accounting transaction is either debited or credited depending on the nature of the account and the rule applied to it. In an accounting equation: - Assets = Liabilities + Equity, if an asset account increases by a debt then one must also either decrease credit another asset account or increase (credit) a liability or equity account.