Talk:Debits and credits

Unnecessary/useless banners

Please indicate specific sections that need to be corrected and do not tag the entire article. Or rather place the banner in the section that contains the errors.Sweetmat (talk) 21:42, 19 November 2011 (UTC)

Please make use of the following link for cleanup templates Wikipedia:Template messages/Cleanup and use specific templates only.

Radical reformation

To me this article had become a collection of disjointed and in some cases unrelated sections trying to explain Debits and Credits. I have taken the bold and radical move of rewriting much of the article and combining and summarising sections already in the article. There were far too many examples which to me did not explain what a debit or credit is or what it does.

  A Debit value increases a Debit value or decreases a Credit value. A Credit value increases a credit value or decreases a Debit value.

"Increases, decreases, values" - what a load of garbage. A credit is where something comes from and a debit is where it ends up. Period, that's all, the end, finished, done.

Euc (talk) 14:08, 30 April 2013 (UTC)

In isolation in an article like this, it is difficult to explain the above statement without also understanding the Double-Entry bookkeeping system. Simply making the article longer will not explain it any better. NilssonDenver (talk) 22:44, 25 November 2011 (UTC)

This article is for people who do not fully understand what debits and credits are and what they do and why accounting is done that way. To such people, only examples can make this understandable. Lots of examples. This article is not a place to attempt brief definitions. Your sentence "A Debit value increases a Debit value or decreases a Credit value." is nonsense to readers who do not yet grasp the basic concepts. Your attempts to improve the article actually make it much worse. I am reverting, because the prior version contains much that should be part of the article. Greensburger (talk) 18:25, 26 November 2011 (UTC)

I agree with Greensburger's statements in this instance. What you did earlier in my opinion was far worse than what stands here today (you deleted key information and just about everything else). Your work had no citations and did not seem more informative or easier to understand for novices or professionals. Please do not take this criticism as a personal attack and your contributions are requested though I do not think that we need to "be bold" with the current article. Tweaking the article now is the focus. The article has improved greatly over the past few months and is receiving great ratings from the community at large. Rather consider revising sections that are marked up or make smaller but meaningful changes elsewhere in the article. Sweetmat (talk) 09:32, 28 November 2011 (UTC)

In addition to my previous comment, the size of this article is not too large to be reduced so significantly according to wikipedia standards (see: Wikipedia:Article size) for more information.Sweetmat (talk) 11:59, 28 November 2011 (UTC)

English accounting is not 'backwards'

From the article:

"In the American system of financial accounting or bookkeeping, an increase (+) to an asset account is a debit. An increase (+) to a liability account is a credit. In the English system, the entries are reversed."

I'm lost here - people in England don't account the opposite from people in America? We all do it the same way the world over, Dr to increase an asset. Have I misunderstood or is this some kind of mistake or I'm misunderstanding the use of the terms "American Accounting" and "English Accounting"... al a 'Dutch Auction' or 'Indian Gifts'? — Preceding unsigned comment added by 83.244.197.164 (talk) 10:59, 16 February 2012 (UTC)

This seems to be somebody's misunderstanding or mistake. I have reverted it because the edit was made without citing a reliable source. But even if a reliable source can be found, if hardly anybody in the UK does it backwards, it should not be presented in this article. There are numerous examples of non-standard practices. For example some printed calendars put Sunday to the right of Saturday, but that fringe practice should not be mentioned in the calendar article.Greensburger (talk) 14:05, 16 February 2012 (UTC)

Just to point out, Sunday being put to the right of Saturday is in fact mentioned in the calendar article, at least twice for different reasons. AaronMP84 (talk) 06:14, 27 December 2012 (UTC)

What do you mean backwards? In many countries debits are recorded on the left and credits in the right column. In the middle east where double entry accounting originated, (early trade between China/India and Europe like the silk road) they often do it the other way so you could say it's us that does it backwards.

Which side of the books debits and credits are recorded on is entirely arbitrary. It really makes no difference which way around you do it so long as other people reading your books know. So long as credits go in one column and debits in the other and they have the correct headings in the top it doesn't matter to the figures. All it does is make it harder for someone else to read. Before PCs I found it easy to have only one money column but record credits on one side of the page and debits on the other.

Euc (talk) 14:01, 30 April 2013 (UTC)

Once the penny drops

This article makes something complicated that is really simple. Here is a long winded explanation of the whole thing to help you understand. It actually boils down to two sentences.

An account is a group or set of things. It can be money or sheep and cattle in a farmer's paddock. Accounting means keeping track of things that move around. Money can move from one account to another or one person to another. Sheep or cattle can move from one paddock to another or one farm to another (or onto my diner plate). It's all recorded the same way.

A credit is where something comes from when it moves and a debit is where it ends up. Being omnivorous I rather enjoy debiting my stomach with bits of cattle.

If you put money into the bank, the bank will credit you and debit its own holdings. A statement from the bank will show a credit. Your books are a mirror image of the bank's. You have taken money out of your pocket and put it in the bank so on your books you credit your pocket and debit your bank account. What is a credit on the bank's books is a debit on your books.

If a farmer moves half a dozen sheep from paddock1 to paddock2, then (s)he credits paddock1 and debits paddock2 with half a dozen sheep. That's why it's called double entry accounting. For every credit there must be a debit. A transaction is nothing more than a moving something and is recorded with a credit and a debit.

The idea of assets and liabilities has also been forgotten and adulterated in recent years. If you take out an overdraft from the bank, the bank statement will show a debit balance. Your books will be a mirror image so it will be a credit balance because the bank is where the money came from. If on the other hand you put more money in the bank (debits to the bank) than you have taken out (credits from the bank), the bank's books will show a credit balance but yours will show a debit balance.

An asset is therefore and account with a debit balance and a liability is an account with a credit balance. (Sorry, one sentence because this is all you need to know.)

There are a lot of people, I was once amongst them, that think it's the other way around. That's because they are used to reading bank statements and not keeping their own books.

Think about it. There is no need for negative numbers. Enclosing negative numbers in brackets is equally unnecessary because it is the same as having a minus sign in front of it. The only time you ever need to subtract anything at all is when you find the difference between credits and debits to balance an account.

I know a few top notch highly paid accountants including, two cousins, a sister and couple of friends, who taught me this stuff yet I know of practicing accountants that don't understand this stuff. See if your accountant agrees with the single sentence. If they don't, get a new one.

Euc (talk) 13:46, 30 April 2013 (UTC)

In your comments, you wrote the following:

If you put money into the bank, the bank will credit you and debit its own holdings. A statement from the bank will show a credit. Your books are a mirror image of the bank's. You have taken money out of your pocket and put it in the bank so on your books you credit your pocket and debit your bank account. What is a credit on the bank's books is a debit on your books.

What you wrote in that paragraph is true, but is so poorly stated that it will only confuse a beginner. You failed to distinguish assets and liabilities in the cited paragraph. The reason your books are a mirror image of the bank's books is because your books show an asset, while the bank's books show it as a liability (they owe you the money).

You have it the wrong way around. You have to know the balance (credit or debit) before you know if it an asset or liability not the other way around.60.240.73.6 (talk)

You also wrote:

An asset is therefore an account with a debit balance and a liability is an account with a credit balance.

That is not what those words mean. An asset account can have a debit balance or a credit balance or a zero balance, although it usually has a debit balance. Likewise a liability account can have a debit balance or a credit balance or a zero balance. If you overdraw your bank checking account (the bank's liability) the normal credit balance will become a debit balance. But that does not instantly transform the bank's liability account to an asset account because it now has a debit balance. Yes, the overdraft is the bank's asset because you owe them the money, but the checking account is still a liability account with a debit balance. Greensburger (talk) 05:52, 1 May 2013 (UTC)

Sorry - its you that is wrong. If an account has a credit balance, you have taken more out than you have put in. (Like a bank overdraft) You therefore owe the account and it thus a liability. If it has a debit balance, you have put in more than you have taken out so it owes you. It is thus an asset. I think you need to rethink your definition of an asset or liability.

60.240.73.6 (talk) 12:01, 1 May 2013 (UTC)