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Not really, the meaning of debit and credit depends on the type of account That's how most accountants think about it. But I think there's something more funda

Not really, the meaning of debit and credit depends on the type of account That's how most accountants think about it. But I think there's something more fundamental: a CR entry is an increase is what the company owes (to creditors or shareholders), and a DR is an increase in what the company owns. EDIT: see this link for how this relates to the accounting equation https://news.ycombinator.com/item?id=32501707 https://news.ycombinator.com/item?id=32501707

emptyfile 3y ago
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jfengel 3y ago
Isn't that exactly backwards to what most people think of credits and debits? If you credit me something, I now have something. I don't owe anything. I can kinda squint and see "Oh, you want the universe to balance, so if I have something it is some kind of karmic debt". But it still feels like exactly the opposite of what I grew up thinking of these terms to mean.
- rahimnathwani 3y ago
  It's the opposite because when a counterparty (like a bank or a store) says they're 'crediting your account', they're talking about the impact from their perspective, not your perspective.
t_mann 3y ago
That's (somewhat) true for accounts that represent stocks (assets, liabilities, not really for equity though), it's not true for accounts that represent flows (income, expenses). Income is recorded as a credit entry in an income account, eg (the corresponding debit entry would typically be on something like a current account or claims on customers).
- rahimnathwani 3y ago
  Consider the positioning of income and expense accounts within the accounting equation. Essentially, they are components of equity. View equity as the company's obligation to its shareholders. A credit entry signifies an increase in what the company owes, whether to creditors or shareholders, while a debit entry reflects an increase in the company's assets.

emptyfile 3y ago

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jfengel 3y ago

Isn't that exactly backwards to what most people think of credits and debits? If you credit me something, I now have something. I don't owe anything. I can kinda squint and see "Oh, you want the universe to balance, so if I have something it is some kind of karmic debt". But it still feels like exactly the opposite of what I grew up thinking of these terms to mean.

rahimnathwani 3y ago
It's the opposite because when a counterparty (like a bank or a store) says they're 'crediting your account', they're talking about the impact from their perspective, not your perspective.

t_mann 3y ago

That's (somewhat) true for accounts that represent stocks (assets, liabilities, not really for equity though), it's not true for accounts that represent flows (income, expenses). Income is recorded as a credit entry in an income account, eg (the corresponding debit entry would typically be on something like a current account or claims on customers).

rahimnathwani 3y ago
Consider the positioning of income and expense accounts within the accounting equation. Essentially, they are components of equity. View equity as the company's obligation to its shareholders. A credit entry signifies an increase in what the company owes, whether to creditors or shareholders, while a debit entry reflects an increase in the company's assets.