Talk:Debits and credits/Archive 1

Language Links

The Link to the German "version" is wrong as it links to a book of the same name.195.80.200.200 16:30, 15 May 2007 (UTC)

The whole article could be rewritten as follows:-

Double Entry Bookkeeping is a widespread method of keeping accounts. I.e a record of the financial transactions of a person or organization.

It has the following basic components.

1) Accounts. Each account has a name and/or number. And a list of amounts of money, which can be added up to form the account total or balance at any time. These amounts are of two kinds, debits and credits. (See below)

An account is conveniently and conventionally represented by what is called a ‘T’ account. Two lines in the form of a letter T are drawn and the name and/or number is written above the cross piece of the T. The debit amounts are listed (by convention) on the left hand side of the downstroke of the T and credits on the right.

The balance of the account is found by adding up the amounts on one side of the T and subtracting those on the other.

2) Postings or transactions. Every transaction or posting consists of at least 3 parts: an amount of money, an account to which it applies and an indication of whether it is a debit or credit transaction. E.g. Dr. or Cr. Narrative or explanation may be provided in addition.

3) Posting Rule. By definition and in principle in double entry bookkeeping, every amount is entered twice; once as a debit and once as a credit, to two different accounts. However in practice this rule can be modified so that debits and credits are grouped in sets and in each set the sum of the debits must equal the sum of the credits. . An explanation of Debit and Credit transactions.

I am a trader; I sell something to Joe Bloggs but he does not pay cash. So I record in his account what he owes (Latin: debit = he owes) me and I put it in the left hand column headed Debit. In this case the corresponding credit will go in the Sales Income account on the right hand side.

When he pays me I must enter the amount in his account on the opposite credit, right hand side. And the debit goes in the Bank or Cash account on the LHS.

Contrariwise, if I buy something , I enter the amount that he is trusting me with (Latin: credit = he believes or trusts) on the LHS. And when I pay him I post debit to his account and credit to the bank account or the cash account.

An explanation of Debit and Credit accounts.

From the above we see that the sales income account mostly has credit entries and hence a credit total. So it is referred to as a credit account. This applies to any income account.

Contrariwise cost of sales or any other expense account is a debit account.

Cash and the current account at the bank are debit accounts and contrariwise a loan account is a credit account.

By extension of the above all liabilities appear as credit accounts and assets as debit accounts.

Some accountants or accounting systems will assign a positive sign to debits and negative to credits or vice versa.

but I am a newbie here and am not sure how to go about it. Tequila12 (talk) 22:49, 15 October 2009 (UTC)

Merge

The two discussions on the merge have been moved to: Talk:Debits and Credits/Debit and Talk:Debits and Credits/Credit (accounting).

While some people voted no, a majority voted to merge, so I did. Ariel. 08:53, 29 October 2006 (UTC)

Page move

I disagree with moving the page from 'Debits and Credits' to 'Debit and credit', because 'Debits and Credits' is a title. Your example 'enclave and exclave' are simply two english words, but 'Debits and Credits' is the name of the double entry system. That's also why I made Credits uppercase.

If you google a bit you will find more hits for 'Debit and credit', but if you look very few of them are talking about the double entry system, however with 'Debits and Credits' nearly all the hits are talking about the system.

I will not move the page back, because I'd like to hear from people with more experience in the field - for example in a textbook, what is the name of the chapter? Ariel. 19:10, 31 October 2006 (UTC)

Why group Debit & Credit together unless you are writing for a bookkeeping or Accounting Journal. Credit has many meanings, Credits also has many meanings. This is an not a financial encyclopedia. I feel that the accounting world is influencing this article. Debit and Credit are closely linked , but would you search for an article on Debits and Credits or Debit and Credit. I consider myself knowledgeable about this area and Debit and Credit does not appear right to me. BUT an article on bookkeeping/accounting debits and credits to me is acceptable but it must be made clear that it is an article about two bookkeeping terms which if written as two seperate articles would not be as clear to the reader. I would agree that "Debits and Credits" would be a more appropriate title. The title Debit and Credit would indicate to me that the writer is not familiar with the area of bookkeeping/accounting. An Article page for each 1.Debit (redirect debits) 2.Credit (redirect credits) and 3. Debits and Credits is my suggestion --NilssonDenver 23:38, 31 October 2006 (UTC)

The reason we didn't have separate article about debit and credit is we had nothing to say. Everything said about credit was also true (in reverse) about debit. And you are correct - this article is specifically about bookkeeping. So far no one has come up with anything to say about debit or credit that doesn't have to do with bookkeeping. Thanks for agreeing with me on the page name, I will wait a little longer and give User:NeonMerlin a chance to reply before moving it back. Ariel. 01:21, 1 November 2006 (UTC)

I still support Debits and Credits NOT Debit & Credit NilssonDenver 22:09, 12 November 2006 (UTC)

To claim that "Debits and Credits" is a title (which I take to mean a proper name) is incompatible with the first paragraph of the article. If my moving this to the lower-case title was wrong, then the first paragraph is wrong and needs to get replaced. Michael Hardy 01:32, 8 January 2007 (UTC)

Clean-up

This page needs a bit of a clean up. Not being an experienced editor, I do not know how to do this. Examples of problems include internal links in External Links section and the page not being properly seperated into sections.--203.45.122.191 10:43, 29 November 2006 (UTC)

Have you got a user ID. If so will you login using it before doing any changes. I will help with any cleanup you want to. Also check out [[1]] for help on editing. NilssonDenver 11:13, 29 November 2006 (UTC)

moved from my talk page

I've copied the following from my talk page. Michael Hardy 01:23, 9 January 2007 (UTC)

Re: moving Debits and Credits to Debits and credits: not again! Can you please read the talk page before moving an article, you are the second person to move this, and now someone has to move it back. We have gone over this before, and Debits and Credits (uppercase) is the correct page name. We are probably going to have get an admin to do a history merge now. Ariel. 19:46, 7 January 2007 (UTC)

If "Debits and Credits" is a title (a proper noun) that should be capitalized, then the whole first paragraph of the article is wrong and needs to get replaced. If you can alter the first paragraph to make clear the nature of the topic in that way, I'll move it back. Michael Hardy 01:37, 8 January 2007 (UTC)

What needs to be altered in the first paragraph to make it clear? Debits and Credits are what is understood in the bookkeeping and accounting industry. They are technical terms. I am no English Grammar expert, but Debits and Credits are a accountancy technical area and to try and fit them in with proper english grammar may change the meaning of the terms. I dont know how this will all fit in with english grammar. At least if we all understand how we came to the final article name we could avoid constant article name changing. NilssonDenver 11:58, 8 January 2007 (UTC)

I'm really surprised you ask this. Here's the first paragraph:

Debit and credit are formal bookkeeping and accounting terms that have opposite meanings and come from Latin. Debit comes from debere, which means "to owe". The Latin debitum means "debt". Credit comes from the Latin word credere, which means "to believe".

Nothing in this suggests that the whole phrase "Debits and Credits" is a proper noun—a name, like the name of an organization or a book title or the like. Rather, it suggests only that debit and credit are terms used in a technical way in a certain field, and that they naturally go together (hence one article rather than two). If either or those words, or both, were always capitalized then I'd say that they should be capitalized in the title. But merely saying "debits and credits are an accountancy technical area" is not reason to capitalize the words. Look at list of mathematics articles and click on any letter and you'll see hundreds of things that are technical terms in a particular field, and they're not capitalized. Wikipedia:Manual of Style is clear that you don't capitalize initials merely because they're in an article title. Michael Hardy 23:52, 8 January 2007 (UTC)

Please note: I did NOT say the first paragraph is UNCLEAR. I said the first paragraph is inconsistent with the contention that the phrase "Debits and Credits" is a proper noun requiring capitalization. I think that is perfectly obvious. Michael Hardy 01:25, 9 January 2007 (UTC)

Sorry for my ignorance but whatever the problem is with the title it is not obvious to me. Debits and Credits appears correct to me, please explain in plain english why Debits and credits is the correct article name. I am not disagreeing with what you say, I just don't understand :-) NilssonDenver 21:44, 9 January 2007 (UTC)

Because Wikipedia:Manual of Style clearly says one should not capitalize an initial letter merely because it's in an article title. That convention is universally followed except by some newbies who haven't caught on yet. There has to be a specific reason to capitalize. Usually the reason is that it's a proper noun, like Albert Einstein or Church of England or Caspian Sea or War and Peace, etc. If there's a universal convention among the practitioners of a particular field that (perhaps unbeknownst to the rest of us) a certain word or phrase is required to be capitalized, that is a perfectly acceptable reason, but in that case, practitioners of that field should so inform the rest of us if we ask about it. Merely saying they are technical terms in some field doesn't do it, as I've mentioned earlier. If there's some universal rule in accounting that these terms are always capitalized, in this case it would appear prudent to mention that in the first paragraph. In this case, I notice that they are sometimes capitalized but more frequently not capitalized when they appear in the middle of sentences in this article. Michael Hardy 02:01, 10 January 2007 (UTC)

There are two things here: the concept as a whole of 'Debits and Credits', and the specifics of what a debit, or a credit is. Most of the first paragraph is made up of descriptions of the compenents of debits and credits, and thus is lowercase. An excellent example is the 'National Electrical Code'. It's the name of an entire concept, the same is true here. Ariel. 03:39, 10 January 2007 (UTC)

But names of laws and the like are often treated as proper nouns, as in "the Privacy Act", etc. Mere concepts, on the other hand, are not proper nouns. Michael Hardy 00:12, 11 January 2007 (UTC)

Gramatically you are probably right and people are so use to doing things wrong because they look right. Your work is cut out for you fixing and arguing this point. We who are lax in our english grammar will continue to make glaring mistakes because of our ignorance. On a similar note but difeerent, a great book to read is "Eats, Shoots and Leaves". Picture a panda bear with a gun and get the double meaning when you remove the comma after shoots. NilssonDenver 00:33, 11 January 2007 (UTC)

This article has gone off topic

This article contains major errors. The introduction is incorrect in its explanation of debits and credits. NilssonDenver (talk) 23:41, 6 February 2008 (UTC)

I have now made changes to the introduction. Discuss! NilssonDenver (talk) 00:20, 7 February 2008 (UTC)

Introduction change of 27th Feb 2008

This was the original entry of one of the paragraphs

In an accounting system, transactions are recorded using a debit and a credit journal. In each transaction, one account issues a credit, the receipt of which is then recorded as a debit in another account. In an asset account, a debit entry signifies the receipt of new assets, and thus represents an increase in assets. A credit entry signifies a transfer of assets to another account, and thus decreases assets. In a liability account, a debit entry represents a sum to be applied toward the satisfaction of the liability, and therefore decreases the liability. A credit entry signifies a transfer of funds to another account, and therefore increases the liability.

"A credit entry signifies a transfer of assets to another account, and thus decreases assets." Depreciation can be shown as a credit entry against an asset account. A credit entry is not a transfer of assets to another account. The term "transfer of assets", in my humble opinion is not appropriate.

"A credit entry signifies a transfer of funds to another account, and therefore increases the liability." "Funds" also in my humble opinion may casue confusion.

What I am trying to get is an introduction that could appear on the article of the day page. Not to technical but not over simplified. NilssonDenver (talk) 11:35, 27 February 2008 (UTC)

still confused

I remember being confused with these concepts at university and now returning to them out of interest (some time since) I'm still confused. Half way down the page there is an explanation that a debit is an 'inflow' and credit is an 'outflow' from an account. I can buy this as it's something I can grasp. The explanation of why it's screwed up in banking statements is also understandable. (Although problermatic, you'd expect banks to explain this to customers the first time they open an account).

But what I still have problems with is the tables represented for the phone expense example. The first table states that when you pay for a phone expense, you're --cash-- is credited (goes out)... which is all good. However then it says that your --phone expenses-- are debited (comes in/goes up) which is counter intuitive.

The same on the phone companies end. --cash-- comes in (is debited) ...all good, makes sense. Then --revenue-- is credited (goes out/down), which doesn't make sense.

What assumptions am I making to screw up the picture. I think my argument is valid. Presumably the account names come with connotations in this context than they are expected to be used in accounting.

All in all, this page is still very confusing for the lay person. --Dmg46664 (talk) 14:59, 2 May 2008 (UTC)

You may want to look at Double-entry bookkeeping system#Debits and credits for a different explanation. The short answer is: whether debits or credits go "in" or "out" depends on the type of account, debit or credit. And for each debit on one type of account, you have to have a credit (of the same amount) on an account of the other type. Lars T. (talk) 17:49, 2 May 2008 (UTC)

Going to add comments on this topic to the Double-entry bookkeeping system#Debits and credits page.--Dmg46664 (talk) 07:23, 3 May 2008 (UTC)

The definition of debits and credits as inflows and outflows is wrong - that's what's confusing you. Debits and credits don't map to a real world concept. They're purely a mechanic used to make sure that the books reconcile. A 'debit' is something that increases the value of an account with a 'normal balance' of debit and decreases an account with a 'normal balance of credit'. A 'credit' is something that increases the value of an account with a 'normal balance' of 'credit' and decreases an account with a 'normal balance' of 'debit'. The 'normal balance' of an account just indicates what type of transaction (credit or debit) will increase it - ie. whether a credit is an inflow or an outflow for that particular account. Revenue accounts, Equity accounts and and Liability accounts have a normal balance of 'credit'. Asset accounts and Expense accounts have a normal balance of 'debit'. That's it. It kind of feels like it's floating in limbo but it's a necessary abstraction to make the books balance. Trying to read more into it than that will just confuse you because there's nothing more there. --Irrevenant [ talk ] 20:24, 17 March 2009 (UTC)

I have suggested above that a simpler flow of explanations is necessary to clarify this topic, because it really is very simple. It was after all written by a fifteenth century Italian monk: with the emphasis on fifteenth century. Once the concept of a debit account and a credit account are adequately explained then debit and credit transactions are easy to understand; you debit a debit account to make the numbers bigger and credit a credit account to do the same thing. I will try and put together a suggested article in the next few days if anyone thinks that is worthwhile.

Athouston (talk) 08:28, 14 August 2009 (UTC)

"Contra account" redirects to this page but there is no mention of contra accounts on this page.

Like the subject says.--Irrevenant [ talk ] 19:31, 17 March 2009 (UTC)

difference debit and credit

the debits is what you got the credit is the source of the item you received —Preceding unsigned comment added by 203.177.100.98 (talk) 07:35, 4 August 2009 (UTC)

difference debit and credit

the debits is what you got the credit is the source of the item you received ₩¥ —Preceding unsigned comment added by 203.177.100.98 (talk) 07:37, 4 August 2009 (UTC)

Problem with the etymology of dr/cr

The words debit and credit derive from the Latin debitur ("it is owed", from debere) and creditur ("it is believed/trusted", from credere), which are abbreviated dr and cr. —Preceding unsigned comment added by 210.205.3.195 (talk) 08:29, 8 January 2010 (UTC)

Is this true? In other W-European languages the words are debet and credit, i.e. the 3d person singular: *he/she/it owes" and "he/she/it believes/trusts". That suggests that perhaps the English "debit" is a mistake that stuck. Somebody with an etymological dictionary could perhaps check? 203.143.239.55 (talk) 01:50, 5 February 2010 (UTC)

Rewrite

This page consisted of an introduction, which had several long winded comments on ideas about how to think about debits and credits with conflicting nomenclature and included the fact that in cobol, including any other computer langague and math in general there a negative numbers which can be used to represent things. A section on origin of terms that contained further long winded comments on various ideas about who to think about credits and debits. A principles and rules section that said not much at all.

Have made the introduction a brief introduction. Reduced the origin section to the origin and usage of the terms. Have made the principles and rules section a brief summary of the rules for debits and credits. Duplicates the double entry section a bit but provides more examples to help people grasp the concepts of how to do debit and credit transactions.

Dewatf (talk) 00:34, 15 February 2009 (UTC)

The article heading is Debits and Credits and I believe that is the correct way to label the article from a search point of view.

The introduction however does not deal with this. May I suggest that Debits and Credits is an accounting system developed by Paccioli or whoever, whenever, that enables the business owner to keep track of the value of his enterprise' would be a more appropriate beginning.

The next section could then explain the meaning of debit and credit as it refers to the asset and liability accounts.

This could then be followed by an explanation of the use of the terms debit and credit as they apply to transactions.

This flow fosters a general understanding of each concept that builds on the previous in a simple manner.

I made a small addition to the article to clarify the discussion on debit and credit accounts but sorry I din't sign it: I'm a newbie and missed that bit.

Athouston (talk) 08:10, 14 August 2009 (UTC)

Sorry I have put my entry in the wrong place (Language links) and am wondering how to correct my mistake. Tequila12 (talk) 22:52, 15 October 2009 (UTC)

Inaccuracy

The article states:

The left side of the accounting equation (Assets) is designated as debits. The right side of the accounting equation is designated as credits.

However, this is misleading at best. Accounts from the left (asset) side of the Accounting Equation may be debited or credited, and the same is true for accounts from the right (liability + owner's equity) side. It is true, however, that asset accounts are said to be "debit-balanced" while liability and equity accounts are "credit-balanced." —Preceding unsigned comment added by 71.3.218.33 (talk) 05:03, 4 February 2008 (UTC)

The article says:- debit is defined as "an entry of a sum owing"; But this is meaningless unless you say to whom the sum is owing. Tequila12 (talk) 20:24, 17 October 2009 (UTC)

Debit and Credit card confusion

Hello,

I'm not entirely sure if I'm at the correct page for this but if I'm wrong feel free to correct me.

I've noticed recently that there is a difference between what Canadians and Americans believe Debit and Credit are. The majority of American tourists seem quite willing to argue with Canadian cashiers that their Visa cards are debit cards. Unfortunately, our debit and credit system does not register their bank account behind the Visa and just uses the credit system. So when I tell people that I am only able to accept Debit cards at certain times I get a line up of credit cards (Visa, Mastercard, Amex, Discovery). Litlest amazon 16:09, 3 September 2007 (UTC)

• In Australia "Debit cards" are cards which utilise the credit card system (eg. Visa) but draws money solely from the cardholder's personal bank account. They look and are used exactly the same as credit cards. I suspect this is something different yet again because in Australia, in the situation you describe above, only credit cards would be usable, not debit cards. ie. the opposite of what you said. Can any Americans shine light on this matter? --Irrevenant [ talk ] 19:55, 17 March 2009 (UTC)

In England I have a debit card and a credit card both of which say VISA on them. Tequila12 (talk) 20:07, 17 October 2009 (UTC)

Debit Cards and Credit Cards having nothing to do with Debit and Credit as used in bookkeeping.

A Credit Card means that when you pay for something using a credit card you don't actually pay any money out until you pay your credit card company when the bill comes due from them. They give you credit. So in this case the word credit is used in the context of lending money or extending credit.

A Debit Card means that when you pay for something using a debit card the money is actually taken form your bank account immediately and you don't get credit. Debit cards are replacements for cheques (US-check) The banks use the word debit card to indicate it is not a credit card. To confuse things even more, in bookkeeping a debit is used to indicate an expense and a credit is used to indicate a liability. When you use a credit card you build up a liability as you don't have to pay the bank until maybe 30 to 60 days after the actual date of the transaction while using a debit card you pay immediately so it is an immediate expense to you, you have parted with your money there and then. And even more confusion, the credit card companies issue both debit and credit cards! NilssonDenver (talk) 23:06, 23 October 2009 (UTC)

The nomenclature behind "Debit" cards comes from the bank's entries in their ledgers. From the bank's point of view, your deposit account (savings, chequing, etc) is a liability: it's money that they owe you because you've given it to them to hold. When you withdraw money (including using a "debit card") the bank records the transaction as a debit on your account in their ledger. A debit to a liability reduces the amount owing - since you've taken some of your money out (i.e. the bank has paid you) the bank now owes you less money. This is the same entry as withdrawing cash or paying by cheque, which is why the name "check card" is commonly used in the United States.

On the other hand, "Credit" cards refer to the fact that the bank is extending you credit for your purchase, which is not the same usage as "credit" in bookkeeping. The bank pays for your purchase (a book credit from their other assets, for example cash) and debits your credit card account, which is an asset to the bank because it's money that you owe to them - a debit to an asset account increases the amount owed to the holder. When you make a payment to your credit card, the bank records it as a credit to your account (reducing the amount owing).

Confusing, isn't it? Basically, you should not try to think of debits and credits (this article) in terms of the debit and credit cards that banks issue. Ivanvector (talk) 22:37, 17 May 2010 (UTC)

Regarding the payment issue, I don't know what the situation is in the US with bank cards/ATM cards, but I do know that check cards & debit cards that are issued through banks with the Visa logo (and likely also by MasterCard and others) are in fact credit cards. They have the same account number patterns and are processed through the credit card networks. The only difference is that the funds are drawn from a deposit account instead of a credit account. From the comments above, that seems to be the case in Australia and the UK as well. This is different from the system we have in Canada. Our debit cards are issued by the banks directly, and processed through the Interac network, which is entirely different from credit card processing. When you use a non-Canadian check/debit card in Canada, it is processed through our credit card network, and if that is not available then your card will not work. In amazon's case, if the machine will only accept debit cards (i.e. Interac cards) then it will not process non-Canadian cards at all. Ivanvector (talk) 22:37, 17 May 2010 (UTC)

Debit and Credit Confusion

Making the difference clear between Dr and Cr is of paramount importance for this article. I feel the various reasons people become confused by these terms is an issue for later discussion. Knowing why other people are also confused doesn't help the confusee. Can we leave that section out of the intro please? 195.66.30.23 (talk) 09:35, 22 November 2007 (UTC)

I agree that a clear and rational description of Dr and Cr is paramount. If you tell people they are confused then they are, irrespective of how simple the explanation. Keep in simple.

Athouston (talk) 08:17, 14 August 2009 (UTC)

CAN SOMEONE ARCHIVE ALL THIS STUFF BELOW - PRE 2009 DISCUSSIONS

Done. See above, or here.

I left in the "Understanding Capital" section immediately below so I can pick through it, although it's surely a copyvio. Ivanvector (talk) 22:46, 17 May 2010 (UTC)

Correction: I should have removed it in the first place. So now I am. Ivanvector (talk) 17:01, 20 November 2010 (UTC)

Introductory text about double bookkeeping, check if there is any usable material here

Text here was an unreferenced copyvio and has been removed. I should have removed it in the first place, my bad. I left the text below from the original contributor. Also, this edit was made after the page was archived. If an admin comes by and wants to have an issue with it, feel free to slap me. Ivanvector (talk) 17:01, 20 November 2010 (UTC)

(NB: I didn't write the text, nor did I copy-paste it to Wikipedia, just moved it from the actual page where it had been placed) --193.167.7.220 (talk) 08:51, 1 March 2010 (UTC)