Want answers? Let’s explore the perfect training solution and business plan just for you. We can keep you updated on special course offers. Also, you’ll get our free introductory video about the benefits and methods of starting your own practice..

Name:   E-mail:   Zip Code:   Phone:

Newsletters:   Accounting & Bookkeeping   QuickBooks Tips   Tax Tips

lock We value your privacy  

Learning Accounting and Bookkeeping Basics

Difference between Credits and Debits

This article will help you understand an important distinction in accounting and bookkeeping - the difference between a credit and debit.


This article was taken from our weekly Accounting and Bookkeeping Newsletter. Signup for our Accounting Newsletter to learn about more accounting topics like this each week.

Credits and Debits Training CourseWhen you deposit money in the bank, the cashier will tell you "I'll credit your account." From that experience, most people assume that cash is a credit, and so credits are good. That is further reinforced when reductions in the accounts are referred to as debits. Besides, if you remove the "i" "debt." So, debits seem bad.

Unfortunately, the conditioning we receive at the bank is causing real confusion in the accounting class. Why? Because in accounting we understand that the bank account is a debit account, and that debts are credit accounts - the opposite of what most people expect. That is why your checking account card it referred to as a debit card.

In fact, debits and credits are neither good nor bad. Each transaction, whether it be a good transaction (deposits), or a bad transaction (bills) has both a debit and an equal credit. That's why they call it "double-entry accounting." When the cashier is telling you he or she will "credit your account", they are also entering a debit for the same amount that they are not telling you about. The same is true for the debits to your account - there is also a credit being made at the same time.

I find the best way to understand debits and credits is to identify the two components of each transaction.

Universal Accounting® Training LogoUniversal Accounting® is a Accounting School that can teach you how to understand the components of each accounting transaction. The Professional Bookkeepers Course from Universal's is a home study video course perfect for brushing up on your accounting knowledge or starting your own business as an Accountant or Bookkeeping professional. Debits and Credits are only the start of some of the things you will learn with this training.

Take our Accounting Quiz to test your knowledge and see what you will learn in our Professional Bookkeeper™ Course.

The Professional Bookkeeper™ Course also makes it easy with examples, graphics, photos, and illustrations. For instance for Debits and Credits examples would be given like this:

Debit & Credit example:

You can learn to understand to identify the two basic components of each transaction:

  1. what did you get?
  2. where did it come from?

The debit is what you got
and
The credit is the source of the item you received.

Let's imagine that you purchase a computer with your credit card. Since the computer is what you received 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.

The banks tend to confuse us because they are telling us the entry to their liability account. When you deposit money in the bank, their liability to you increases. Since liabilities are credit accounts they are crediting our account. When they reduce their liability to us, they are debiting their liability account.

So, if you can identify what you received and where it came from in every transaction you have debits and credits mastered.

This is only one of the hundreds of topics we cover in our Professional Bookkeeper™ Course


To learn more about the Professional Bookkeeper™ Course signup for our weekly Accounting Newsletter.
This professional training will prepare you to understand debits and credits and all parts of the accounting process.

This training will even prepare you guide you through how to start your own Accounting and Bookkeeping Business and make $30-40 an hour.

See what our Students are saying about our courses.




 

 

Other Articles about learning accounting and bookkeeping:

Basic Accounting

What is the difference between an accountant and bookkeeper?

Bookkeeping Training and Accounting Training are Different

Financial Analysis- the accountants tool

Accounting Training: Consider your Options

Starting a Small Business

Want answers? Let’s explore the perfect training solution and business plan just for you. We can keep you updated on special course offers. Also, you’ll get our free introductory video about the benefits and methods of starting your own practice.

Name:
E-mail:
Zip Code:
Phone:

Newsletters:
Accounting & Bookkeeping   QuickBooks Tips   Tax Tips

lock We value your privacy