Differences In Debit And Credit In Accounting Finances, Understand The Terms Before

Illustration of debit and credit recording (Unsplash)

YOGYAKARTA Two terms that are often used in accounting financial themes are debit and credit. Unfortunately in understanding it, it is often reversed. The difference in debt and credit is very clear so it needs to be understood correctly.

In general, there is a difference in debt and credit, if the debt is an additional money, while credit is an expenditure that occurs in a transaction.

Although in general the terms debit and credit in financial themes have opposing meaning, the difference between the two is not that simple. Check out the following differences in credit and debit.

Both credit and debit come from Latin. The term debit in Latin is deceived which means debt, while the term credit was originally a Crederate which in Indonesian means the party who believes it.

The use of these two terms in the world of financial records does not just happen. The history of accountability in the world begins with Luca Pacioli, who is currently known as the World Accounting Father. At that time he used the term debit and credit, which was shortened by dr and cr in a paired ledger system. He noted each transaction on two different books, namely debt and credit accounts.

In the records made by Luca Pacioli, the transactions that have an impact on increasing assets or costs will be recorded in the debit book, while transactions that have an impact on reducing assets or triggering other costs will be recorded in the credit book. The separation was carried out to facilitate the recording process as well as understanding.

Currently, debit and credit records are done electronically, allowing both of them to be on the same page but have different column positions. On the balance sheet of the debit column company is on the left of the account, the credit column is in the right column.

Both in the debit and credit columns, the object of the funds will be recorded. The recipient's account will be recorded in the debit column, while the giver will be recorded in the credit column.

Funding can be in the form of incoming or outgoing funds. Funds that enter the company include debit, while funds that come out are part of the credit.

Both for and losses must be recorded in a financial bookkeeping. Recording profits or income that enter the company will be recorded in the credit column. On the other hand, all expenses that lead to losses will be recorded in the debit column.

Sources of increase can occur in debit or credit. In the debt, the source of increase can be in the form of an increase in cash to spending both on salaries, taxes, insurance, and so on.

Meanwhile, sources of credit increase are obtained from various sources, such as funds deposited by shareholders, income, debts, and so on.

That's the difference in debt and credit. Visit VOI.id to get other interesting information.