Double entry accounting has been around since the late 15th century, when it was described by an Italian friar, Luca Pacioli.

“Contrary to popular belief and even some dictionary definitions, accounting debits and credits do not mean decrease and increase. The only constant definition of debits and credits is that debits are left-column entries and credits are right-column entries. In fact, debits and credits each increase certain types of accounts and decrease others. In asset and expense type accounts, debits increase the balance and credits decrease the balance. In liability, equity and income type accounts, credits increase the balance and debits decrease the balance.

For example, debits increase your bank account balance and credits decrease your bank account balance. Wait a minute, you might say, a debit card decreases the balance in my checking account, because I take money out of it. And when the bank gives me money back on something, they credit my account. So why is this reversed in accounting?

Banks report transactions from their perspective, not yours. Their perspective is exactly opposite to yours. To you, your bank account represents an asset, something you own. To the bank, your bank account represents a loan, or liability, because they owe you that money. As explained in this chapter, asset and liability accounts are exact opposites in the way they behave. In a liability account, debits decrease the balance and credits increase the balance.

When you take money out of your bank account, the balance in your account decreases. To you, this is a decrease in an asset, so you credit your bank account. To the bank, this is a decrease in a liability, so they debit your bank account.”

From the GnuCash user guide

All is so very logical – duh, It is easier to believe that TV has all those tiny people sitting inside and playing the music.

  • hehe
    those terms have always confused me. Especially on my phone bills.

  • Accounting was one of my most disliked units in my uni degree šŸ˜‰

    • Unfortunately my accounant has told us that there is no alternative now.

  • I don’t deal with figures well and I am awful at money matters.!!!

    • But the fact is money matters…

    • oh! forgot to add – the only figures I love are the curvaceous ones šŸ˜‰

  • confused???

    Chhote Log !!

    (Remember? Swati?)

    • Re: confused???

      No Swati does not remember