Differentiating Debit and Credit


Posted on May 17th, by Gerard in Did you know?. No Comments

For certain people, like accountants, it’s nothing. For many others, it’s a pain. There are just two choices, but which one to choose?

It must be understood that there will always be a minimum of memory required. That having been said, there’s a line that works well: Revenue is a Credit. It’s the key to establishing the rest. Every time you need it. We must also know that there are two types of accounts: Revenues and Expenses on the one hand and Assets and Liabilities on the other hand. The thinking goes like this:

- If Revenue is a Credit, its opposite, the Expense, is a Debit.

- Revenues must perforce be associated with Assets; in both cases, we’re talking about gains.

- The mental gymnastic required is that for the other type of accounts, we must reverse. Therefore, Revenue is a Credit but Assets are Debits.

- If the Asset is a Debit, its opposite, the Liability, is a Credit.

You know that Revenues and Expenses are the temporary accounts and that Assets and Liabilities are the permanent accounts.

In Summary, you must remember two things: Revenue is a Credit and its associated permanent account, the Asset, is reversed and therefore, a Debit.





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