Debit vs Credit
Debit and credit are two concepts that are an integral part of any accounting system and also have great significance in lives of individuals in the form of debit and credit cards. Even a layman knows his account has been credited when he deposits money or a check drawn in his favor, and his account has been debited when he withdraws money from his account or a check issued by him in favor of another person or party comes for clearance in the bank he has account. However, there are many more differences than the simple fact that money going and coming into your account as will be clear after reading this article.
Credit puts money in your account and so it is good, while debit takes away money from your account so it is bad, but it is not so simple a concept. However, in accounting, both debits and credits are merely transactions that need to be recorded in statement. In fact, it is in accounting that we are told that a bank account is a debit account. So whether you are depositing or withdrawing, both get entered in a system known as double entry accounting.
Have you ever wondered what the difference between a credit and a debit card? A debit card is no more than an ATM card, and when you use it to make purchases, the money automatically gets deducted from your bank account. As such, there is no interest charged on any transaction made through a debit card. On the other hand, a credit card purchase does not disturb your account, and there is no deduction though you may get a monthly statement from the credit card company with interest charged on your transaction.
What is the difference between Debit and Credit?
· For an individual, there is difference between debit and credit and can be easily understood when he deposits money in his bank account and it shows as credit in his account. On the other hand, debit takes place when he withdraws money or issues check to another person or party.
· However, in accounting, no difference is made between debit and credit and they are merely ways of recording transactions in a financial statement. This system of accounting is known as double entry accounting.