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Difference between debit and credit
Debit & Credit example:
You can learn to understand to identify the two basic components of each transaction: what did you get? where did it come from? The debit is what you got and The credit is the source of the item you received. Let's imagine that you purchase a computer with your credit card. Since the computer is what you received it's going to result in a debit to the asset account for your computer. The credit will be applied to the credit card liability account for the same amount. The banks tend to confuse us because they are telling us the entry to their liability account. When you deposit money in the bank, their liability to you increases. Since liabilities are credit accounts they are crediting our account. When they reduce their liability to us, they are debiting their liability account. So, if you can identify what you received and where it came from in every transaction you have debits and credits mastered. |
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