Comment by FredPret
1 year ago
The simplest way to memorize it is to remember the accounting formula and one simple rule.
- Assets minus Liabilities = Equity (net worth)
- Your bank account or cash balance increases on the debit side
From this you can figure out that if you borrowed money, the debt increases on the credit side and the cash influx debits your bank account. The same goes for an income.
But signed amounts (instead of debit/credit) formula is a way easier.
Sum of entries of assets/liabilities accounts = Equity. Moreover assets and liabilities become one type.
And single entry bookkeeping is even "easier". Doesn't mean it's a good idea.
Single entry is not easier. Every time it makes things horribly complex really fast. I don't understand your point.
That is why I sincerely hope this way takes over the debit/credit approach
Surely it credits my bank account. Credits make things go up, no?
Clearly not. But this is why I let an accountant do it.
The bank will tell you there's a credit because to them, it's a credit. Your bank account is a loan from you to them - they owe you that money. When your account goes up, their debt to you goes up... thus it's a credit to them, and a debit to you.
Thanks. That's actually really helpful. Of course every transaction is a credit or debit depending on your point of view.
That's probably not the way I would have designed it. I'd probably have designed it from the point of view of the account, so that we'd all agree on what addition and subtraction mean. But that's my programmery point of view. I imagine that they're more concerned with the flows -- not just the numbers, but especially the actual materials being bought and sold.
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