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The Corporate Finance Institute Accounting
Debits and Credits
When most people hear the term debits and credits, they think of debit
cards and credit cards. Debit cards refer to straight up cash payments
while credit cards are a form of borrowing. In addition, most non-
accountants think of debits as subtractions from their bank accounts
and credits as additions to their accounts. In accounting, however,
debits and credits refer to completely different things.
Debits and Credits are simply accounting jargons that trace their
roots to hundreds years ago and are still used in today’s double-entry
accounting system. A double-entry accounting system means that every
transaction that a company makes is recorded in at least two accounts,
where one account will get a “debit” entry while another account will get
a “credit” entry.
These entries are recorded as journal entries in the company’s books.
Debits and credits can mean either increasing or decreasing for
different accounts, but their T-Account representations look the same in
terms of left and right positioning.
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