← Back to context

Comment by lisper

2 years ago

> Debit means an entry in the left column. Credit means an entry in the right column

But that just shifts the arbitrariness of the whole thing from the words "debit" and "credit" to the words "left" and "right".

11 comments

lisper

Reply
EvanAnderson  2 years ago

I think his intent was to prevent students from fixating on making the words debit and credit "mean" something by themselves. A debit doesn't have some intrinsic meaning about the "flow of money". It's just an entry in the left column. On the other hand, a debit to Accounts Receivable actually means something.

  • lisper  2 years ago

    > A debit doesn't have some intrinsic meaning about the "flow of money".

    But it does. "Debit" is an English word with an established meaning in common usage. It means to take money out of an account. It is related to the word "debt" which is something that decreases the net worth of the debtor and increases the net worth of the creditor. If you overpay a bill, the (positive) difference between what you paid and what you owed is a credit on your account, and can be used just like money to pay your next bill.

    • mhink  2 years ago

      That's not entirely correct- or at least, it's more complicated than that. The question of whether a debit/credit increases/decreases an account has to do with the kind of account you're talking about.

      When I deposit money, it modifies two accounts at the bank:

      - the account which represents how much money they owe me - and the account which represents how much money they have on hand.

      The former is a liability, and the latter is an asset.

      The meaning of debit/credit is reversed between these two types of account. So, when I deposit $100, the entries entered are:

          - CREDIT mhink's account $100 (increasing liability)
    - DEBIT cash account $100 (increasing asset)

      Since we only see one side of this, we start to associate "debit" with "less money for me" and "credit" as "more money for me".

      Oddly enough, another common financial situation reinforces this interpretation from the other direction: accounts with utility providers. Unlike the bank, your account at the utility company represents how much you owe them. So the meaning of debit/credit is reversed, but so is the direction of responsibility: your account at the utility provider is money you owe them, which is an asset. So when I pay them $100, the entries entered are:

          - CREDIT  mhink's account $100 (decreasing asset)
    - DEBIT   cash on hand $100 (increasing asset)

      5 replies →

    • pessimizer  2 years ago

      > If you overpay a bill, the (positive) difference between what you paid and what you owed is a credit on your account

      Or it's a debit on the company's account. I think that's the point that was being made; not to confuse technical terms with English common usage, and not to go to the dictionary or etymology(!) as the arbiter. Debits are credits and credits are debits, but the real question is which column does it go into.

      Same nature as discussions about clients/servers.

      1 reply →