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Old Monday, January 10, 2011
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Question Q about accounting...

debit means and credit means...? why we debit all expenses and why we credit all incomes...?
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Old Monday, January 10, 2011
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Debits and credits are a system of notation used in bookkeeping to determine how and where to record any financial transaction. In bookkeeping, instead of using additions '+' and subtraction '-' symbols, a transaction uses the symbol DR (Debit) or CR (Credit).

Debit and credit are formal bookkeeping and accounting terms. They are the most fundamental concepts in accounting, representing the two sides of each individual transaction recorded in any accounting system. A debit indicates an asset or an expense transaction, a credit indicates a transaction that will cause a liability or a gain. A debit transaction can also be used to reduce a credit balance or increase a debit balance. A credit transaction can be used to decrease a debit balance or increase a credit balance. Debit and credit form the basis of the double-entry bookkeeping system. Every debit and credit value is recorded in ledgers and from these ledgers, financial reports can then be prepared.

In double entry, bookkeeping debit is used for asset and expense transactions and credit is used for liability, gain, and equity transactions. For bank transactions, money received in is treated as a debit transaction and money paid out is treated as a credit transaction. Traditionally, transactions are recorded in two columns of numbers: debits in the left hand column and credits in the right hand column. Keeping the debits and credits in separate columns allows each to be recorded and totaled independently. Where the total of the debit value amounts is lower than the total of the credit value amounts, a balancing debit value is posted to that nominal ledger account. That nominal ledger account is now "balanced". An account can have either a credit value balance or a debit value balance but not both.

A debit can also be used to reduce the balance on a liability, gain, and equity account. This has the effect of reducing a credit balance by the value of the debit transaction. The balance in a nominal that is normally expected to hold a debit balance may change from a debit balance to a credit balance.
A credit can also be used to reduce the balance on an asset or expense account. This has the effect of reducing a debit balance by the value of the credit transaction. The balance in a nominal that is normally expected to hold a credit balance may change from a credit balance to a debit balance.
In some cases such as fixed assets, all debit transactions will be recorded in one nominal account and all credit transactions will be recorded in a contra nominal account, with the exception when an asset is disposed of. The purchase of an asset will be recorded in a fixed asset account (debit transaction) and the depreciation of the fixed asset (credit transaction) will be recorded in a contra nominal ledger account, fixed asset depreciation.
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