Credit and debit are the basis of accounting

Debit and credit are two terms that are specific to the work of the accountant. Moreover, the study of accounting science begins with an explanation of the basics of a double entry. Debit is a column to the left, and credit is to the right. At first everything looks very simple, but in reality it turns out to be much more complicated. From the university course of accounting, students usually remember only that debit is a debt that will soon be returned to us.

However, in real life it turns out that there are passive accounts, on which everything is reflected quite the opposite. And we have not even started talking about active-passive accounts. Therefore, it can not be unequivocally said that credit is the debts of our enterprise to partners.

If we mean strictly active accounts, then when reflecting on them business transactions on the left side, the property rights of the enterprise or its costs are recorded. As for passive accounts, here the debit is the revenue of the enterprise or its costs. Therefore, there is no point in talking about the debit and the credit of posting separately from the direct account that affects this posting.

If the amount on the right side of the balance sheet is greater than the amount on the left side, then in the case of active-passive and active accounts, this means that the value of the organization's assets is reduced. On the other hand, the credit balance on a passive account is only possible if the property or debt of an enterprise increases before its counterparties.

Let's look at what these accounting concepts stand for in a general example, understandable even by the common man in the street. Imagine that moving from a loan to a debit is your way from one point to another. Let's say we collected 5 liters of water from a well. In this case, the bucket is a debit. A loan is a well, the volume of water in which has decreased by 5 liters.

Other accounting terms are fairly simple to understand. The opening balance is the balance of funds on a specific account at the beginning of the reporting period (year, month, quarter), and the final balance at the end of this period. Some scientists give these terms other names: "balance incoming" and "balance outgoing".

Finally I would like to tell a story about a young accountant who managed to achieve success in life. This story today has become a professional anecdote. So, a graduate of one of the higher economic institutions settled in an accounting office. He turned out to be a good specialist, and his business quickly went up the hill. But he also had one strangeness in which none of his colleagues could understand. Every day when he came to work, he unlocked the top drawer of his desk and looked there, and then began his daily business. Passed year after year, and he became already the chief accountant, got his own study, but from the habit of this way to start the working day did not refuse. Many curious colleagues tried to see what was in the box, but it was always locked. And now our accountant retired, and then, breaking the top drawer of the table, colleagues found that there was one single note in it, on which it was written in large letters: "CREDIT is on the right, DEBET is on the left."