What debit and credit really are, are just names given to describe different types of transactions ('business deals' for all you non-financially literate types, Shame on you!) . They are important because they represent the balancing function present in all modern financial accounting systems. Every business transaction is split into the debit entry and the credit entry. For example:
Chan Sam Pat buys a shiny iPhone worth RM1,999 using his cash from his wallet.
In order to record this transaction, the discerning accountant would know that he is buying himself an asset (the iPhone) using another form of asset (his Cash), therefore increasing his fixed assets (assuming he doesn't get bored of the iPhone after 6 months of use) and decreasing his current assets (his Cash): The accounting treatment would be to:
DEBIT Fixed assets - RM1,999
CREDIT Cash - RM 1,999
So the point that i'm trying to make is this: FOR EVERY DEBIT THERE IS A CREDIT AND FOR EVERY CREDIT THERE IS A DEBIT or alternatively: FOR EVERY CREDIT THERE IS A DEBIT AND FOR EVERY DEBIT THERE IS A CREDIT.
But that is just one treatment for assets, in the next post lets take a look at other classes of transactions.
Oh, and for my KDU kiddies, here the stuff I promised you are uploaded in this post as well. Cheers!
The Golden Equation slides
Debit and Credit slides
Lesson plan for Fin. Accounting
Course Outline for Fin. Accounting
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