Credit and debit is the basis of accounting

Debit and credit are two terms thatare specific to the work of the accountant. Moreover, the study of accounting science begins with an explanation of the basics of a double entry. Debit is a column to the left, and credit is to the right. At first everything looks very simple, but in reality it turns out to be much more complicated. From the university course of accounting, students usually remember only that debit is a debt that will soon be returned to us.

However, in real life it turns out thatthere are passive accounts on which everything is reflected quite the opposite. And we have not even started talking about active-passive accounts. Therefore, one can not unequivocally say that credit is the debts of our enterprise to partners.

If we mean strictly active accounts, thenwhen the business operations are reflected on them, the property rights of the enterprise or its costs are recorded on the left side. As for passive accounts, here the debit is the revenue of the enterprise or its costs. Therefore, it makes no sense to talk about the debit and the credit of the posting separately from the direct account that affects this posting.

If the amount on the right side of the balance sheet is greater thanleft, in the case of active-passive and active accounts, this means that the value of the organization's assets is reduced. On the other hand, the credit balance on the passive account is possible only with the increase of the property or the debt of the enterprise to its counterparties.

Let's look at what thesethe concept of accounting on a common example, understandable even to the common man in the street. Imagine that moving from a loan to a debit is your way from one point to another. Let's say we collected 5 liters of water from a well. In this case, the bucket is a debit. A loan is a well, the volume of water in which has decreased by 5 liters.

Other accounting terms aresimple enough to understand. The opening balance is the balance of funds on a specific account at the beginning of the reporting period (year, month, quarter), and the final balance at the end of this period. Some scientists give these terms other names: "balance incoming" and "balance outgoing".

Finally I would like to tell a story aboutone young accountant, who managed to achieve success in life. This story today has become a professional anecdote. So, a graduate of one of the higher economic institutions settled in an accounting office. He turned out to be a good specialist, and his affairs quickly went up the hill. But he also had one strangeness in which none of his colleagues could understand. Every day when he came to work, he unlocked the top drawer of his desk and looked in there, and then he began his daily business. He passed year after year, and he became already the chief accountant, he got his own study, but he did not refuse to start the working day in this way. Many curious colleagues tried to see what was in the box, but it was always locked. And so our accountant retired, and then, breaking the top drawer of the table, colleagues found that there was only one note in it, on which it was written in large letters: "CREDIT is on the right, DEBET is on the left."

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