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  • Credit and Debit in Business Accounting

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    Credit represents giving money or increasing liabilities, equity, and income. Debit represents taking money or increasing assets and expenses. For example, when a shop sells goods to a customer on credit, the shop debits the customer by increasing the accounts receivable asset, and the customer credits the shop by increasing their liability. In accounting entries, debits and credits are used to record increases and decreases across accounts to maintain the balance sheet equation of assets equaling liabilities plus equity.

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    Credit represents giving money or increasing liabilities, equity, and income. Debit represents taking money or increasing assets and expenses. For example, when a shop sells goods to a customer on credit, the shop debits the customer by increasing the accounts receivable asset, and the customer credits the shop by increasing their liability. In accounting entries, debits and credits are used to record increases and decreases across accounts to maintain the balance sheet equation of assets equaling liabilities plus equity.

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    7 views1 page

    Credit and Debit in Business Accounting

    Uploaded by

    pallav_mohan20079552
    Credit represents giving money or increasing liabilities, equity, and income. Debit represents taking money or increasing assets and expenses. For example, when a shop sells goods to a customer on credit, the shop debits the customer by increasing the accounts receivable asset, and the customer credits the shop by increasing their liability. In accounting entries, debits and credits are used to record increases and decreases across accounts to maintain the balance sheet equation of assets equaling liabilities plus equity.

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    What is the meaning of credit and debit in business accounting?

    In: Business Accounting and Bookkeeping, Accounts Payable, Accounts Receivable [Edit


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    Credit is giving money and debit is taking. A shop will debit its customers in exchange for goods and
    the customers will credit the shop for the goods.

    In Accounting:

     Debits represent increases in value of assets and expenses and decreases in income, liabilities
    and equity 
     Credits represent increases in liabilities, equity and income and decreases in assets and
    expenses

    Example: To record the purchase for cash of office furniture 

    Debit Office Furniture and Credit Cash 

    The shop example above is an excellent example of the reason accounting seems backwards to most
    people. The way two parties account for a transaction is a mirror image. When Shops and Banks tell
    you they are crediting your account, they are telling you how they are accounting for it, which is
    backwards from the way you account for it.

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