Lesson 2 Discussion Forum Explain the difference between the

Lesson 2 Discussion Forum Explain the difference between the correct use of the terms debit and credit and the incorrect use of these terms.

Solution

CORRECT MEANING OF DEBIT AND CREDIT :
In an accounting entry, DEBIT either increases an asset or expense account or DEBIT decreases the liablity or equity account.
On the other hand, CREDIT in accounting entry either decreases and assets or expense account, and kit also increases a liability or equity account.
In the above explanation if you are not clear with the correct meaning of debit and credit, than I am explaining you in the simple way: In the double entry accounting, we use two columns ( one is used for positive and other as negative ). when the entry increases or decreases it automatically shows their affect in the both columns. the entries which are shown in the left side are called debit and the entries om the right side is called credit.

INCORRECT WAY OF PRESENTING DEBIT AND CREDIT :
some people uses this term in normal day language as whatever is increasing is termed as credit and whatever is decreases is termed as debit. But this is totally incorrect way.
for example : In bank while checking pass books, money added increases the pass book balance and considered as credit entry and vice a versa for debit. but this is not a correct way of presenting the entry.
one need to understand the logical meaning of debit and credit.