From the course: Finance and Accounting Tips

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Debits and credits

Debits and credits

From the course: Finance and Accounting Tips

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Debits and credits

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- One of the great mysteries of accounting are the terms debit and credit. Accountants use these top secret terms to speak a special language that only those in the accounting club can decipher. So what do those terms mean? Well, debits and credits are terms used by accountants a lot. And they do have special meaning. But they certainly aren't top secret and they certainly aren't difficult to unravel and understand. Nowadays, debit simply means left. And credit means right. No secret, but the hard part is perhaps the next step. Left and right of what? Well in other tips we talked about the balance sheet and the income statement and you will remember assets, liabilities, revenues, expenses and the like. Each of these is broken down further into specific accounts, like cash, inventory, supplies, land, taxes, payable et cetera. And each of these accounts can do one of two things. They can go up and they can go down. Cash goes up, or it goes down. Taxes payable goes up, or it goes down…

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