The foundation of any of the accounting relies on credit and debit. When one wants to learn about accounting, then firstly, it is must to know regarding debit and credit. In a financial period, there are many transactions took place. It’s the job of an accountant to keep an eye to all transactions and identify the debit or credit as well. One who is new to accounting might have no knowledge regarding the debit and credit or they may just take it as the similar transaction, but actually, there is a huge difference in both and to understand that better one should look into these points mentioning the difference.
• Debit is mainly opposed to the credit. In many cases, when debit enhances the account, at the same time, credit lessens the account and the same goes vice versa. There is an important exception, there which takes place when cash enters into business as capital. In this case, both the accounts go to increase, but at that time cash would be debited and capital would be credited.
• At the time of account expenses, enhances and the income account lessons, then we debit the account. On the other hand, we credit the account at the time when the expense account goes less and the income account goes up.
• Debit indicates usage of one account, but, credit shows the source of another account.
• Debit is the result of crediting another account and goes vice versa.
• Credit and debit is the base of the double entry system. One can’t be able to exist another account in the absence of one.
Understanding Debit in Detail:
Definition- Debit is using the value of a transaction.
Application- Debit is a helpful idea to express more or lessen the expenses or incomes or liabilities.
Placement in T-Format- This is always placed on the right side.
Balancing Act- When in the double entry system, then the only debit can’t be able to handle the entire transaction.
Understanding Credit in Detail:
Definition- Credit is the source of the transaction value.
Application- Credit is an idea to show the increase or decrease of liabilities and income or assets or expenses as well.
Placement in T-Format- This is always placed on the left side.
Balancing Act- Credit is not even capable to balance the entire transaction when there is an absence of debt account.
Conclusion- When we look into the detail of credit bookkeeping and the debit bookkeeping mentioned above with the specific differences, then we came to the conclusion that both credit and debit are different from each other. Still, both works like twins in accounting. When we understand anyone, then understanding another would become even easier. The entire task is to understand what increases or what decreases and then you can easily get account should be credited or debited. You can understand that better with picking any transaction of the business and make that record a journal entry. This would also make you get what exactly means and applying credit and debit.