Thursday, February 18, 2010
Every single transaction recorded in the accounting process falls into one of two categories: it is either a debit or a credit. We could use the official definitions here, but I prefer to keep absorption levels (and interest) high, so we are going to use very simple definitions and examples. A debit is a transaction of value “added” to an account. A credit is a transaction of value “removed” from an account. Debit, value is added. Credit, value is removed. For example, in your checking account, a deposit is a debit, a check is a credit. This is as simple as the definition gets in practical application. How you apply those transactions, depends upon the type of account you are working with.
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