In this article we will define and focus on key difference between debit and credit.Contents of the page are as follows
Debits and credits are the common terms associated with accounting, whenever a transaction between two entities will occur one account will be debited and consequently, the other account will be credited.specifically, these two terms are related with double entry system of transaction.
What is Debit?
What is Credit?
|1.||When money is deducted from a bank account , then that account is said to be debited.||When is money is deposited in a bank account, then that account is termed as credited|
|2.||In banking terms ,Cash flows out of the banking system – money is taken out from bank account.||In banking terms, Cash flows into the system or it’s the reserved cash with the system, that is the money is deposited into the bank account.|
|3.||In terms of asset, Debit means liquefying of asset, means cash flows in.ex- if we sell our property, we get money for the property we sell(liquefying property).||In terms of asset, credit means purchasing of asset, means cash flows out. Ex. – If we purchase any property, we pay to get that property.(cash flows out).|
|4.||Financial system is a close system wherein amount of money going out of the system is termed as Debit (destination)||Financial system is a close system wherein amount of money in the system is termed as Credit (source)|