True Meaning of Debit and Credit
Although it is simple in its definition, the meaning is rarely discussed or at least the discussion is not on plain sight. My blog here is to show you the true meaning of debit and credit. In its simplest form, debit represent left side of the general account while credit represent right side of the general account. It represent the popular formula for accounting: Assets = Liabilities + Equity. However, no one explain why debit and credit are like this, making the misconception that debit is negative and credit is positive. First, we need to know what is the content of debit and credit. Debit consists of assets and expenses; assets are capital that you spent or earn for the business, basically they are the business property as in a value. Expenses are the costs you make for production in a business. Cash itself also considered an asset too as you used them spend for the business (cash is a capital, suprisingly people don't talk about it) On the other hand, credit consists of liabil...