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What is the meaning of credit and debit in business accounting?

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Credit is giving money and debit is taking. A shop will debit its customers in exchange for goods and the customers will credit the shop for the goods.

In Accounting:
  • Debits represent increases in value of assets and expenses and decreases in income, liabilities and equity
  • Credits represent increases in liabilities, equity and income and decreases in assets and expenses

Example: To record the purchase for cash of office furniture

Debit Office Furniture and Credit Cash
The shop example above is an excellent example of the reason accounting seems backwards to most people. The way two parties account for a transaction is a mirror image. When shops and banks tell you they are crediting your account, they are telling you how they are accounting for it, which is backwards from the way you account for it.
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