Debits and credits and confusion; Oh My!!?

Question

Debits and credits and confusion; Oh My!!

I am pretty smart and usually understand things pretty easily including anatomy and physiology. But I read about debits and credits in two different books on financial accounting, plus looked it up in wikipedia, and it has got to be one of the most confusing, non-sensical concepts I have ever run across. The books start by saying this will simplify the book keeping, and then proceed to an explanation that doesn't make any sense at all. Did they do this on purpose just to confuse people and make them feel stupid?

Can anyone explain "Debits and Credits" to me in a way that actually makes sense? I usually remember things better when they fit together well, like pieces of a puzzle that work together. Can anyone give me anything to help me learn this concept?

Thanks!

Brendan · Accepted Answer

Many moons ago when I was training my mentor told me " Credit the giver and debit the receiver". I have passed this nugget of logic on to many people since.

For instance You purchase an apple for resale at £1.00 and pay cash.

The resale purchases account gets the apple so we debit that £1.00
The cash account gives the money so we credit that £1.00

Trust me, it will make sense in a little while, there is nothing magical about accountancy.

Anonymous · Answer

"Debits and Credits."  Literally the left and right hand side of a balance scale.  Those you see in front of a courthouse.  Every thing that happens at the one side must happen at the other.  Thus the debit for milk and tea, must be credited to cash.  And a sale of our product - will be debit cash/check/bank and credit stock/production.   
Peace.

Many names used for the same things, and that gets confusing.

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Debits and credits and confusion; Oh My!!?

2 Answers