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Credit vs Debit

Updated: Apr 15

Credit vs Debit Do you get confused by debit and credit transactions? ๐Ÿ˜ฌ

Letโ€™s go through these transactions so you have error-free books and accurate financial reports!

(๐Ÿญ) ๐—ช๐—ต๐—ฎ๐˜ ๐—ฎ๐—ฟ๐—ฒ ๐——๐—ฒ๐—ฏ๐—ถ๐˜ (๐——๐—ฟ) ๐—ฎ๐—ป๐—ฑ ๐—–๐—ฟ๐—ฒ๐—ฑ๐—ถ๐˜ (๐—–๐—ฟ) ๐˜๐—ฟ๐—ฎ๐—ป๐˜€๐—ฎ๐—ฐ๐˜๐—ถ๐—ผ๐—ป๐˜€? These are a feature of double-entry accounting (the QuickBooks style) Every transaction has an OPPOSITE entry that BALANCES the first (debit vs. credit). Letโ€™s say you pay $600 cash for a new desk. The $600 flows OUT of your cash account (credit) and INTO your furniture asset account (debit). (๐˜˜๐˜ถ๐˜ช๐˜ค๐˜ฌ ๐˜ต๐˜ช๐˜ฑ: ๐˜ฅ๐˜ฆ๐˜ฃ๐˜ช๐˜ต๐˜ด ๐˜ข๐˜ณ๐˜ฆ ๐˜ˆ๐˜“๐˜ž๐˜ˆ๐˜ ๐˜š ๐˜ช๐˜ฏ ๐˜ต๐˜ฉ๐˜ฆ ๐˜ญ๐˜ฆ๐˜ง๐˜ต ๐˜ค๐˜ฐ๐˜ญ๐˜ถ๐˜ฎ๐˜ฏ ๐˜ข๐˜ฏ๐˜ฅ ๐˜ค๐˜ณ๐˜ฆ๐˜ฅ๐˜ช๐˜ต๐˜ด ๐˜ช๐˜ฏ ๐˜ต๐˜ฉ๐˜ฆ ๐˜ณ๐˜ช๐˜จ๐˜ฉ๐˜ต!)

(๐Ÿฎ) ๐——๐—ผ๐—ฒ๐˜€ ๐—ฎ ๐—ฐ๐—ฟ๐—ฒ๐—ฑ๐—ถ๐˜ ๐—ฎ๐—น๐˜„๐—ฎ๐˜†๐˜€ ๐—ฑ๐—ฒ๐—ฐ๐—ฟ๐—ฒ๐—ฎ๐˜€๐—ฒ ๐—ฎ๐—ป ๐—ฎ๐—ฐ๐—ฐ๐—ผ๐˜‚๐—ป๐˜? No, Debits increase asset and expense accounts. Credits increase revenue, liability, and ownerโ€™s equity accounts. ๐—œ๐—ณ ๐˜†๐—ผ๐˜‚ ๐—ฏ๐—ผ๐—ฟ๐—ฟ๐—ผ๐˜„ $๐Ÿฎ,๐Ÿฌ๐Ÿฌ๐Ÿฌ ๐—ณ๐—ฟ๐—ผ๐—บ ๐˜๐—ต๐—ฒ ๐—ฏ๐—ฎ๐—ป๐—ธ: you debit the cash account and credit the bank loan account

(๐Ÿฏ) ๐—ข๐—ป ๐—บ๐˜† ๐—ฏ๐—ฎ๐—ป๐—ธ ๐˜€๐˜๐—ฎ๐˜๐—ฒ๐—บ๐—ฒ๐—ป๐˜, ๐—ฎ ๐—ฐ๐—ฟ๐—ฒ๐—ฑ๐—ถ๐˜ ๐—ฎ๐—น๐˜„๐—ฎ๐˜†๐˜€ ๐—บ๐—ฒ๐—ฎ๐—ป๐˜€ ๐—บ๐—ผ๐—ป๐—ฒ๐˜† ๐—ด๐—ผ๐—ถ๐—ป๐—ด ๐—ถ๐—ป! Yup โ€“ but youโ€™re seeing only one side of the double-entry. Still clear as mud?

Here is an article that explains further, https://buff.ly/3zuNBJY



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