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Difference between Debit and Credit terms in Journal entry?

Dear all,

What is difference between Debit and Credit terms in journal entry?

Thanks & Regards,

Nagarajan

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6 Answers

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    Former Member
    May 16, 2013 at 05:20 AM

    Hi Naga....

    SAP Accounting has been defined on standard basic rule of Accounting.

    And infact any accouting ERP is based on Standard Accounting rule.

    So what comes in to our account is Debit and what goes/going out from our account is Credit.

    System decides Debit and Credit depending on the type of Transactions.

    For Ex. GRPO, Stock comes in so Dr. and Liability stands or money to be gone so Cr.

    And for Deliver, Stock Cr. as it goes out to customer and Money coming to you against Delivery so Debtor Dr....

    Hope this makes you aware about the concept of Dr. and Cr.

    Regards,

    Rahul

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    • Hi Jitin Chawla,

      Thanks for reply.

      I think it would be better to stop here asking to many question (As per forum rule)

      As suggested, already I have to started to refer accounting basics through web.

      Thanks for all for feedback.

      I will keep this post as open for other expert inputs.....

      Thanks & Regards,

      Nagarajan

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    Former Member
    Apr 28, 2015 at 04:37 AM

    Hi Nagarajan K,

    Debit and Credit are Accounting terms in a Journal Entry.

    One transaction includes at-least two accounts with equal debit and credit, just like a common balance.

    Now the question arises, when to debit and when to credit.

    In simple terms,

    Assets IncreaseDebit  Assets DecreaseCreditExpenses IncreaseDebit Expenses DecreaseCreditRevenue IncreaseCreditRevenue DecreaseDebit Liabilities IncreaseCreditLiabilities DecreaseDebit

    Now according to your example:

    Delivery:

    Raw materials

    COGS

    In case of Delivery, the "Raw Materials" is decreased, so that account is credited and  "COGS" account is expenses that is accounted during the time of sales .

    For every revenue, the corresponding expense shall be accounted.

    JO

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    • Former Member Nagarajan K

      Hello Nagrajan,


      The words debit and credit are not used exclusively by accountants.

      If I say that something is “to your credit,” what do I mean? Most of us will understand that I mean you have accomplished something worthwhile or honorable.

      In common usage, a credit is desirable or good. We assume, then, that a debit must be undesirable or bad. Assigning these “values” to these two terms is what often causes learner problems. In accounting, debit and credit are not assumed to be good or bad; they are simply actions performed in the accounting records.


      The accounting equation can be stated as:


      Assets = Liabilities + Owner’s Equity.


      Like all equations, the accounting equation must balance. The left side must equal the right side: Left = Right.

      In accounting terms, the debits and credits must balance . The debits must equal the credits: Debits = Credits.

      The key to remembering the rules for using debits and credits lies in the accounting equation and the need to remain in balance:

      Assets = Liabilities + Owner’s Equity

      Left = Right

      Debits = Credits

      Assets are on the left side of the accounting equation; increases to assets will be recorded on the left and called debits. Liabilities and owner’s equity are on the right side of the accounting equation; increases to liabilities and owner’s equity will be recorded on the right and called credits. Since debits and credits are opposites, decreases to assets (on the left side of the accounting equation) will be made on the right and called credits. Decreases to liabilities and owner’s equity (on the right side of the accounting equation) will be made on the left and called debits.

      T&R,

      BK

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    Former Member
    May 15, 2013 at 09:08 AM

    Hi Naga Rajan,

    These are accounting terminologies,  in simple  terms it means increase or decrease the value of a certain GL account.  But it depends on the characteristics or type of accounts. GL accounts  type like Assets (Cash in bank and in hand, Accounts receivable, prepayments, fixed assets) and expenses when use Debit it will increase the value but when use credit for these accounts it will decrease. Accounts type like Liabilities ( Accounts payable, Accruals), Equities, Retained Earnings and Revenues when used Debit it will decrease the value and when used credit it will increase.

    Hope this will give you an idea how debit and credit works in ERP system.

    Regards,

    Nick

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    Former Member
    May 15, 2013 at 01:54 PM

    Dear Nagarajan,

    In general, the source account for the transaction is credited and the destination account is debited. Is this you asked for?

    Thanks,

    Gordon

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    • Former Member Nagarajan K

      For all auto created JE, system has embedded mapping rule already. That is why you need to fill up G/L determination. You just need to check what system mapped accounts to understand. Source/destination criteria is for manual JE.

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    Former Member
    May 16, 2013 at 05:00 AM

    In JE we have CREDIT and DEBIT. These are representing the flow of transaction.The money credited means the money is going out from user account. If the cash debited means the cash coming to your account.

    In Credit and Debit has a one relation if the cash is debit from one account then defiantly it should be credited from one account.

    here the cash flow from 101010 account to 102010.


    JE.png (28.8 kB)
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    Former Member
    Apr 28, 2015 at 04:14 AM

    I know this is an old post but I found a good site that explains the concept of debit and credit pretty well:

    The Accounting Equation

    http://www.guru99.com/the-accounting-equation.html

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