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> The "credit" and "debit" terminology is ridiculous because their definitions swap around depending on which account you're talking about, which is an utterly

> The "credit" and "debit" terminology is ridiculous because their definitions swap around depending on which account you're talking about, which is an utterly absurd (mis)use of language and the main reason people find this confusing What would you suggest as an improvement? The article suggests "incoming" and "outgoing" which seems to have the same issue, as does everything I see in your comment (the person spending 5$ on lemonade sure as hell isn't putting 5$ in their accounts sales entry). I'm not fully understanding the confusion both here and in the article.

globular-toast 3y ago
It doesn't matter about the person buying lemonade. Their accounts are theirs alone and don't affect your accounts.
DwnVoteHoneyPot 3y ago
When I talk to accountants, I get confused with debit/credit so I use "increase" and "decrease". Everyone seems to understand me fine. For example, "Decrease cash", to buy equipment "increases assets". "Increase cash" by borrowing money is "increasing liability".
- freedomben 3y ago
  Indeed, the dirty secret is that many accountants think of debit and credit as decrease and increase as well. After using the terms for a little while they switch the symbol (word) they think of, but it still retains the same meaning. They are basically synonymous. source: friends and family members who are accountants and have generously given free bookkeeping tutorials
  - fauigerzigerk 3y ago
    >Indeed, the dirty secret is that many accountants think of debit and credit as decrease and increase as well. So how would you correctly express the parent's example in terms of debit/credit if debit/credit are synonymous with decrease/increase?: >>"Increase cash" by borrowing money is "increasing liability". "Crediting cash by borrowing money is crediting liability" would sound obviously incorrect to any accountant.
    - freedomben 3y ago
      Passing on the answer I got: > I wouldn't say "they are basically synonymous" because there are situations where they flip depending on the rules/approach that you are following. After working with it you get pretty familiar with these situations and don't really even translate anymore. It's important to remember though that there are books the way most people see them, and the way an accountant following GAAP sees them. "Increase" and "decrease" are quite helpful for most people the way most people see the books. If you are applying GAAP it's like working in a different language where words don't cleanly translate. Given that we are mostly talking about double-entry in this thread, I think he is basically telling me I'm wrong but trying to explain how I came by it honestly so I don't feel stupid :-D To quote the famous Bender from Futurama: "I’m so embarrassed. I wish everybody else was dead."
lisper 3y ago
> What would you suggest as an improvement? Use the intuitive meaning of the words: a credit means you have money coming in, a debit means you have money going out. An increase in assets, income, or equity is a credit, and an increase in expenses or liabilities is a debit, and vice versa. Or, alternatively, just use "credit" for any increase, and "debit" for any decrease. But this: "Definition 6: Credit - An entry that represents money leaving an account." is just totally backwards.
- fauigerzigerk 3y ago
  >Use the intuitive meaning of the words: a credit means you have money coming in, a debit means you have money going out. An increase in assets, income, or equity is a credit, and an increase in expenses or liabilities is a debit, and vice versa. An increase in assets is a debit. >Or, alternatively, just use "credit" for any increase, and "debit" for any decrease. How is this consistent with the fact that an increase in my bank account balance is a debit?
  - lisper 3y ago
    You have completely missed the point, which is that the way in which accountants use these words is unnecessarily confusing because it does not align with the common English definitions of the words "credit" and "debit".
    - fauigerzigerk 3y ago
      Yes, sorry, I was defending the established terminology without making clear why. My problem is that your alternatives don't just change the words, they change the logic. The invariant of debit/credit is that they need to balance out. If you choose words that can occur on both sides of the equation then this is no longer true and you're throwing out a lot more than just the admittedly unintuitive meanings of these words.
      - lisper 3y ago
        > My problem is that your alternatives don't just change the words, they change the logic. No, they don't. They just change the words you need to express the logic. > The invariant of debit/credit is that they need to balance out. Sure. So? If I give you a dollar, that's going to balance whether we call that a debit to me and a credit to you or a credit to me and a debit to you. The labels don't matter.
braiamp 3y ago
Because people don't understand that credit and debit only make sense in the context of the account being applied to. If you deposit money to your bank account, it's a credit in your <name of back account>. If you withdraw money from the ATM, you debit your bank account and credit your cash account. But globally you haven't gotten more money.
- tantalor 3y ago
  > If you withdraw money from the ATM, you debit your bank account and credit your cash account You have that exactly backwards! Assets (like bank accounts and cash) are "debit accounts" meaning they increase with debits and decrease with credits. When you withdraw money from your bank account, the bank account goes down, so we know that must be a credit to the bank account, while the cash goes up, that is a debit to the cash account. Your confusion might be due to perspective. From the bank's view your bank account is a liability (credit account) so it increases with credits and decreases with debits.
  - ChirronT447 3y ago
    Do they have it backwards? It sounds like a valid perspective to me. I take money from an ATM: the number in my current account decreases, the cash I have on hand increases. Nothing wrong there. Sure the banks perspective is different but maybe I'm not interested in that. I love that this thread is full of people confidentally saying something that sounds correct or at least reasonable and the first reply that comes back is no you've got that wrong and then what your saying also sound's reasonable but it just seems to depend on the context and perspective. I would have thought accounting a solved problem but apparently not.
    - pas 3y ago
      > accounting a solved problem but apparently not. well, it is if you do it on books, not in natural language. since it looks deceptively simple everyone throws around sentences that are screaming for mandatory context. the whole GAAP (generally accepted accounting principles) (and certs like CFA too) are about codifying this context. what goes where is the name of the game. can you consider this or that an asset or not? is that an expense or you got credit from your vendor, because they shipped it before you paid it? which quarter does it belong to if they shipped it before new year's eve but we only pay it next financial year? etc... etc... that said accounting is not a mechanical system. there are quite a lot of degrees of freedom ... but there are of course clearly wrong ways to do it ( https://en.wikipedia.org/wiki/Creative_accounting https://en.wikipedia.org/wiki/Creative_accounting ) oh, and when someone says debit/credit just use a spray bottle on them and ask them to simply state clearly what happens with the fucking number on which of your accounts, does it increase or decrease. (ie. they should just say that the money goes from this account to that account, and suddenly there's no ambiguity.)
tantalor 3y ago
I solve this by remembering "debit = destination" (d=d) in all cases. Examples: If you deposit money into a checking account (asset) that is a debit (account increases) because the money "goes to" in that account (destination). If you borrow money from a credit card (liability) that is a credit (account increases) because the money "comes from" that account (not destination). The hard part is remembering debit accounts increase with debits, and credit accounts increase with credits.

globular-toast 3y ago

It doesn't matter about the person buying lemonade. Their accounts are theirs alone and don't affect your accounts.

DwnVoteHoneyPot 3y ago

When I talk to accountants, I get confused with debit/credit so I use "increase" and "decrease". Everyone seems to understand me fine. For example, "Decrease cash", to buy equipment "increases assets". "Increase cash" by borrowing money is "increasing liability".

freedomben 3y ago
Indeed, the dirty secret is that many accountants think of debit and credit as decrease and increase as well. After using the terms for a little while they switch the symbol (word) they think of, but it still retains the same meaning. They are basically synonymous. source: friends and family members who are accountants and have generously given free bookkeeping tutorials
- fauigerzigerk 3y ago
  >Indeed, the dirty secret is that many accountants think of debit and credit as decrease and increase as well. So how would you correctly express the parent's example in terms of debit/credit if debit/credit are synonymous with decrease/increase?: >>"Increase cash" by borrowing money is "increasing liability". "Crediting cash by borrowing money is crediting liability" would sound obviously incorrect to any accountant.
  - freedomben 3y ago
    Passing on the answer I got: > I wouldn't say "they are basically synonymous" because there are situations where they flip depending on the rules/approach that you are following. After working with it you get pretty familiar with these situations and don't really even translate anymore. It's important to remember though that there are books the way most people see them, and the way an accountant following GAAP sees them. "Increase" and "decrease" are quite helpful for most people the way most people see the books. If you are applying GAAP it's like working in a different language where words don't cleanly translate. Given that we are mostly talking about double-entry in this thread, I think he is basically telling me I'm wrong but trying to explain how I came by it honestly so I don't feel stupid :-D To quote the famous Bender from Futurama: "I’m so embarrassed. I wish everybody else was dead."

lisper 3y ago

> What would you suggest as an improvement? Use the intuitive meaning of the words: a credit means you have money coming in, a debit means you have money going out. An increase in assets, income, or equity is a credit, and an increase in expenses or liabilities is a debit, and vice versa. Or, alternatively, just use "credit" for any increase, and "debit" for any decrease. But this: "Definition 6: Credit - An entry that represents money leaving an account." is just totally backwards.

fauigerzigerk 3y ago
>Use the intuitive meaning of the words: a credit means you have money coming in, a debit means you have money going out. An increase in assets, income, or equity is a credit, and an increase in expenses or liabilities is a debit, and vice versa. An increase in assets is a debit. >Or, alternatively, just use "credit" for any increase, and "debit" for any decrease. How is this consistent with the fact that an increase in my bank account balance is a debit?
- lisper 3y ago
  You have completely missed the point, which is that the way in which accountants use these words is unnecessarily confusing because it does not align with the common English definitions of the words "credit" and "debit".
  - fauigerzigerk 3y ago
    Yes, sorry, I was defending the established terminology without making clear why. My problem is that your alternatives don't just change the words, they change the logic. The invariant of debit/credit is that they need to balance out. If you choose words that can occur on both sides of the equation then this is no longer true and you're throwing out a lot more than just the admittedly unintuitive meanings of these words.
    - lisper 3y ago
      > My problem is that your alternatives don't just change the words, they change the logic. No, they don't. They just change the words you need to express the logic. > The invariant of debit/credit is that they need to balance out. Sure. So? If I give you a dollar, that's going to balance whether we call that a debit to me and a credit to you or a credit to me and a debit to you. The labels don't matter.

braiamp 3y ago

Because people don't understand that credit and debit only make sense in the context of the account being applied to. If you deposit money to your bank account, it's a credit in your <name of back account>. If you withdraw money from the ATM, you debit your bank account and credit your cash account. But globally you haven't gotten more money.

tantalor 3y ago
> If you withdraw money from the ATM, you debit your bank account and credit your cash account You have that exactly backwards! Assets (like bank accounts and cash) are "debit accounts" meaning they increase with debits and decrease with credits. When you withdraw money from your bank account, the bank account goes down, so we know that must be a credit to the bank account, while the cash goes up, that is a debit to the cash account. Your confusion might be due to perspective. From the bank's view your bank account is a liability (credit account) so it increases with credits and decreases with debits.
- ChirronT447 3y ago
  Do they have it backwards? It sounds like a valid perspective to me. I take money from an ATM: the number in my current account decreases, the cash I have on hand increases. Nothing wrong there. Sure the banks perspective is different but maybe I'm not interested in that. I love that this thread is full of people confidentally saying something that sounds correct or at least reasonable and the first reply that comes back is no you've got that wrong and then what your saying also sound's reasonable but it just seems to depend on the context and perspective. I would have thought accounting a solved problem but apparently not.
  - pas 3y ago
    > accounting a solved problem but apparently not. well, it is if you do it on books, not in natural language. since it looks deceptively simple everyone throws around sentences that are screaming for mandatory context. the whole GAAP (generally accepted accounting principles) (and certs like CFA too) are about codifying this context. what goes where is the name of the game. can you consider this or that an asset or not? is that an expense or you got credit from your vendor, because they shipped it before you paid it? which quarter does it belong to if they shipped it before new year's eve but we only pay it next financial year? etc... etc... that said accounting is not a mechanical system. there are quite a lot of degrees of freedom ... but there are of course clearly wrong ways to do it ( https://en.wikipedia.org/wiki/Creative_accounting https://en.wikipedia.org/wiki/Creative_accounting ) oh, and when someone says debit/credit just use a spray bottle on them and ask them to simply state clearly what happens with the fucking number on which of your accounts, does it increase or decrease. (ie. they should just say that the money goes from this account to that account, and suddenly there's no ambiguity.)

tantalor 3y ago

I solve this by remembering "debit = destination" (d=d) in all cases. Examples: If you deposit money into a checking account (asset) that is a debit (account increases) because the money "goes to" in that account (destination). If you borrow money from a credit card (liability) that is a credit (account increases) because the money "comes from" that account (not destination). The hard part is remembering debit accounts increase with debits, and credit accounts increase with credits.