Understanding Debit and Credit: The Basics of Accounting Principles
Today, we’ll explore the most fundamental concepts in accounting: debit and credit . These are the first topics introduced when you start studying accounting and are essential for understanding the principles of accounting. This post is based on K-IFRS accounting standards and aims to explain the core concepts in a straightforward manner.
✅ Learning Objectives Quiz
- What is the exact meaning of debit and credit?
- What is the core principle of double-entry bookkeeping?
- On which side are increases and decreases of assets, liabilities, and equity recorded?
✅ The Basics of Accounting: Debit and Credit
Debit and credit are core concepts in double-entry bookkeeping.
- Debit : The left side of an account
- Credit : The right side of an account
💡 Key Summary: Debit and credit simply indicate positions in an account. Please note that debit does not mean “debt,” and credit does not mean “profit.”
✅ The Principle of Duality
At the heart of double-entry bookkeeping is the principle of duality. Every transaction in accounting must be recorded with equal amounts on both the debit and credit sides. This means that if entries are made correctly, the totals of the debit and credit sides should always be equal.
💡 Key Summary: The total debits and total credits must always balance.
Account Effects on Debit and Credit
| Account | Increase | Decrease |
|---|---|---|
| Assets | Debit | Credit |
| Liabilities | Credit | Debit |
| Equity | Credit | Debit |
| Revenue | Credit | – |
| Expenses | Debit | – |
Quiz Answers:
- Debit means the left side of an account, and credit means the right side.
- Principle of duality: Every transaction is recorded with equal amounts on the debit and credit sides.
- Increases in assets are recorded as debits; increases in liabilities and equity are recorded as credits.
Have you grasped the basics of accounting? Once you firmly understand the concepts of debit and credit, you can easily comprehend complex accounting transactions. It might seem unfamiliar at first, but with frequent exposure, you’ll become accustomed to it in no time.