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What is debit & credit ?

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While preparing the various accounts in the ledger we must have a clear idea of the meaning of debit and credit which from the very foundation of double entry book-keeping.We give below a summary of what we have learnt about debit and credit.

Debit ( abbreviated Dr) refers to the left side of an account and credit ( abbreviated Cr) refers to the right side.When used as a noun a debit is an entry on the left side  and credit is an entry on the right side of an account. As an adjective, the debit side of an account is the left side and the credit side is the right side. As a verb,to debit is to make an entry on the left side and to credit is to make an entry on the right side of an account.The word charge is some times used instead of the word debit.

The following diagrams illustrate the principle of debit and credit in respect of Ledger accounts.

ANY ASSET ACCOUNT
Debit Side Credit Side
Increase in an asset are entered on the left-hand or debit side Decrease in an asset are entered on the right-hand or credit side.

 

ANY LIABILITY ACCOUNT
Debit Side Credit Side
Decreases in a liability are entered on the debit side. Increase in a liability are entered on the right-hand side or credit side

 

ANY EXPENSE ACCOUNT
Debit Side Credit Side
Increase in expense are entered on the debit side Decrease if any are entered on the credit side

 

ANY INCOME ACCOUNT
Debit Side Credit Side
Increase if any are entered on the debit side Increase in income are entered on the credit side

 

CAPITAL ACCOUNT
Debit Side Credit Side
Decrease in capital entered on debit side Increase in capital are entered on the credit side

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