I happened to see an accounting question on 'Debit what comes in .. credit what goes out..etc'?

Question

My question is what would be the original explanation that made this rule of 'debit what comes in .. credit what goes out.. credit the giver. debit the receiver... debit expense... credit incomde....' Was this all by dumb chance or are there any good acceptable explanation behind.. At least one thing what I can't find an answer for , as an engineer, is when you receive cash your accounting books increase the cash-account by debitting it!?!. The word DEBIT comes from latin DEBT which means to owe , so, How would money received for sales become a 'debit' ? or Are the accountants just use the terminology DEBIT/CREDIT instead of saying enter on Left-hand-side (LHS)/ Right-hand-side.(RHS) . Saying LHS/ RHS for me would be more sensible and less confusing... Any explanation to this .. Please help me understand

Answer 1

Actually, the words debit and credit come from the Latin words Debere and Credere meaning LEFT and RIGHT. That's what they mean, nothing else. Debit means left and credit means right. Assets are on the left side of the balance sheet. They are increased with debits. Liabilities and Equity accounts are on the right, they are increased with credits. Income is increased with a credit because it is ultimately adding to equity. Expenses are increased with debits because they ultimately decrease equity. When you make a journal entry, the debits are always on the left and credits on the right...this is not by accident.

Debits on the left, credits on the right.

Here's a link for you to check out:

http://learning.swc.hccs.edu/members/paul.brady/overview.html

Answer 2

The concept of debit and credit is not an easy one for new students, so through the years, teachers have come up with various ways to help them understand, hence the different sayings. None of them worked for me except the one which says "all assets and expenses are debits, all liabilities, equity and revenues are credits". Your confusion comes from the double entry aspect. For every debit there must be a credit. So if you agree that sales is a credit, the next question must be, then where should the debit go? Cash! If you say cash should be a credit, are you then saying that sales should be a debit?
If you had invented the double entry system, you might have decreed debit sales, credit cash when a cash sale is made and that is what we'd all be doing now, but you didn't, so we have to stick by what has been in use all these hundreds of years. Cheers:-)

Answer 3

Something called NSF fees. From experience: Even if you close an account, pre-authorized charges will go through. Eventually they will stop from what I read, but then the gym sends your bill to a collection agency that will show up on your credit reports. They will sue you. They can garnish your wages and go after your assets. This will incurr more costs such as court costs, levy fees, or garnsihment fees.