Comment by abtinf
2 years ago
> The "credit" and "debit" terminology is ridiculous because their definitions swap around depending on which account
I find it easy to just think of debit as adding to the left and credit as adding to the right. Their definitions are always the same that way.
But that just begs the question because you have to remember the arbitrary assignments of what things go on the left and what things go on the right.
It's the accounting equation being represented in canonical form. A chart of accounts is visualized in the minds of an accountant as:
Assets | Liabilities + Equity
Accounts classified as assets are debit accounts (left side), and accounts classified as liabilities or equity are credit accounts (right side).
The theory discussed everywhere in this thread is sound. You really don't need to use terminology like debit/credit for accounting.
What the discussion misses is the application of this framework. It is useful for a human to be able to visualize a complex transaction and work through missing pieces with the hints this framework provides. I'm missing something on the left? Oh yeah, I missed the deferred revenue debit.
> You really don't need to use terminology like debit/credit for accounting.
That's exactly right -- you don't need to. The problem is that people do use this terminology, and they use it in a way that conflicts with common usage, which makes a very simple concept vastly more confusing than it needs to be.
6 replies →
It's easy! Debits add to the left, credits add to the right :-)
(to be clear, I'm backing up your point by giving the same circular explanation that I got constantly through Accounting 101 and 102, and then occasionally after that when dealing with the books)
Yeah, they should be called leftits and rightits. Or CARs and CDRs.