Definition of Debit and Credit in General and the Differences and Explanations

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To know the meaning of Debit and Credit in general, we must understand the definition of each of these terms. Definition of Credit in general is the ability to make purchases or loans with an agreement to make payments within a certain period. While the definition of Debit in general is a reduction in deposits in a bank account or a record of bookkeeping that increases the value of assets or reduces the amount of liabilities.

Debit and credit are terms that are often used in the world of financial accounting. Debit is defined as an increase in money in savings or accounts and can also be interpreted as an increase in transactions. While credit is defined as spending money when transacting.

However, the term credit is better known as the provision of money for a loan and loan agreement between the bank and its customers and is required to pay off in a certain period of time. Debit and credit cannot only be interpreted as increasing or decreasing money in savings. Because for the benefit of the company's financial statements, debit and credit are not that simple.

Understanding Debit and Credit According to Experts

Credit Benefits
There are several credit benefits, including:

Credit will increase the usability of capital
Increase the usability of an item or product
Credit is useful as a tool for economic stability
Become a medium to increase national income

B. Definition of Debit
The definition of debit in accounting comes from Latin, namely Debere. Debit is the opposite of credit, as a note on a bookkeeping account that adds to the value of assets or reduces the amount of liabilities.

Debit can also be interpreted as money that must be billed to other people or accounts receivable.

Debit and Credit Determination Criteria in Writing Company Financial Statements
Determination of debits and credit when filling in the company's accounting entry indeed often causes confusion. Overview of the notions of debit and credit are:

1. Debit
Data is recorded as a condition of assets and costs that have increased (added) and when liabilities and equity (debt and capital) have decreased. At the time of writing the company's financial journal, the debit is usually on the left

2. Credit
Data is recorded as a condition in which equity and liability increase in number and when assets and costs experience a decline. Contrary to debit, credit is generally written to the right of financial statements.

Here are some examples of situations to determine which ones are debit and which ones are credit:

Sales of goods produced in cash to consumers à Debit is Cash and Credit is Income.
Sales of production goods in debt to consumers Debit is Credit and Credit is Income.
Purchase of production materials from suppliers in cash à Debit is production material and credit is cash.
Purchase of production materials from suppliers on credit à Debit is production material and Credit is debt.
Use of company funds to pay employees à Debit is Salary expenses and Credit is cash.
To determine debit and credit, try to understand the following classification of accounts:

Assets (company assets)
Liabilities (company debt)
Owner ’Equity (company capital borrower)
Income (company income)
Expenses (company spending)
Account categories 1, 2 and 3 are in balance sheet financial statement accounts, while account categories 4 and 5 are in the financial statement income statement account. In writing financial statements of credit and debit the company is known as the term opponent account, namely a transaction that affects at least 2 accounts.

For example, in the purchase transaction of company equipment in debt, the account affected by the transaction is a machine as fixed assets and the opposite account is a business debt as a form of purchase on credit.

The terms debit note and credit note are often used in writing corporate accounting. Debit notes are documents that contain notifications regarding receivables from customers that are increasing for certain reasons.

However, in the debit document bote can also contain about the company to the vendor or supplier. While the credit note is a notification document that contains the company's debt to customers so that it can be used to reduce the company's debt to vendors or suppliers.

The Importance of Making Debit and Credit Reports in the Company
A business in a company certainly often experiences transactions, both internally and externally. These transactions require companies to make transaction documents in the form of financial statements.

One of them is to find out the rate of entry and exit of company funds to minimize the possibility of over budgeting in certain account categories in reporting. There are five elements in accounting transactions, namely debt, assets, income, capital and costs or expenses.

A debit transaction is definitely accompanied by credit transactions. Companies that do not have debit and credit reporting documents cannot control the flow of outflows of the company's finances. In addition, the company's financial data cannot be tracked if anything happens to the company's finances.

With the existence of debit and credit reports, it is expected to help oversee the company's finances from the possibility of corruption from employees. Because debit and credit data are always good, accompanied by receipts or official notes that can be trusted.

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