All business transactions of an organization or a company or a firm may be recorded as debits and credits in the account ledger. This is recorded using two different columns for debit and credit. This process is known as double entry book keeping. In simple words the two terms debit and credit are defined below.
- An entry that increases the asset and decreases the liability may be considered as â€˜debitâ€™. It may increase the balance in an expense account or decrease that of an equity account. It is usually recorded in the left hand side column of the double entry book that is maintained.
- An entry that increases the liability and decreases the asset is termed as â€˜creditâ€™ in an accounts journal. Unlike debit entry a credit entry may be the result of an increase in the equity account and a decrease in the expense account. That is, credit is literally the exact opposite of debit.
A debit entry is recorded on the left hand side of the accounts journal and the credit entry on the right hand side column. In simpler words, debit is the addition of money and credit is the money that has been subtracted from the total fund of the business.
In a valid account journal the total of all the records in the debit side that is the left hand side column must be equal to the sum of records on the credit side that is the right hand side column of the journal. If the debit balance and the credit balance do not match then it may be concluded that the journal is not completely error free as summation of each side must match with the other.
Usage of debits and credits
Whenever a business transaction takes place it always affects two different accounts. One account is credited whereas the other is debited with the same amount. Hence credit or debit always occurs in pair. It may be the case that not just two but more than two accounts are affected as a result of a transaction. But the minimum number of accounts that are affected is two. It is to be made sure that the sum of the debit amount is equal to the sum of the credit amount. This will make sure that the transaction is in balance. It is not possible to develop statements if an accounting transaction is not balanced. This is where the importance of debits and credits column in the accounting transaction record comes into play.
Understanding the concepts of Debit and Credit Homework Answers
Even if the concepts of Debit and Credit Homework Answers may appear to be simple to students they often tend to make mistakes as they assume that debit always means addition of money and credit always stand for deduction of money. That is not always the case. Students need to understand that both debit and credit may have variable effect on the different kinds of accounts.
Here I am going to discuss in brief the different kind of accounts and how they are affected by debits and credits
- Asset: In an asset account, debit results in an increase in balance whereas a credit results in a decrement in the balance.
- Liability: In a liability account a debit results in the decrement of balance and hence a credit results in increment of balance
- Equity: In case of equity account a debit in transaction means the balance is decreased while a credit in transaction will mean that the balance is increased.
What are the rules followed?
Before attempting to try and understand the concept of Debits and Credits Homework Answers, a student must be well aware of the rules associated with debit and credit. In the following segment I am briefly discussing few of the important rules that one must adhere to.
- All accounts except that of assets and dividends and expenses must see a decrease in balance once a debit is added to left hand side column and increase when credit balance is added.
- All accounts except liabilities, equity and revenue accounts must see a rise in balance if credit is added and a downfall in balance once debit is added to the debit column.
The concept of Debit and Credit Homework Answers to your rescue
Keeping the above two simple rules in mind a student may proceed to solve credit and debit homework answers. Even after gaining the basic idea students may find it difficult as certain issues in a studentâ€™s life often leads to misunderstanding of certain topics. Students who do not get time for self study may have to struggle with the burden of homework assignments.
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