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The accounting equation is the right thing to think about. People want debit and credit to mean something more than they need to. My 100-level accounting instr

The accounting equation is the right thing to think about. People want debit and credit to mean something more than they need to. My 100-level accounting instructor said it pretty succinctly: Debit means an entry in the left column. Credit means an entry in the right column. What a transaction means for the business depends on the accounts.

mikeyouse 3y ago
Right - the words themselves aren't as important as the concept. Any replacement word will suffer the same confusion. There's a reason that the language of debits and credits has largely remained the same for the past thousand years, and the language describing accounting is unlikely to be 'optimized' by first-principles CS concepts from people only loosely familiar with the field.
- eviks 3y ago
  There's a reason, but it's definitely not that any replacement is just as bad since that's close to an impossibly strong statement
- grantc 3y ago
  Well said. It's actually not complicated or arbitrary. It also works effectively in practice over the gdp of the known universe. If you are savvy enough to be interested in and understand the different computing approaches to double-entry bookkeeping, one can assume the whole DR/CR concept isn't beyond you.
fauigerzigerk 3y ago
And what if there are no columns? Google "journal entries for X" and you're going to find something like this: Dr accountX £100 Cr accountY £90 Cr accountZ £10 Left and right was fine when T accounts were universally used to record entries, but that's no longer the case.
- eviks 3y ago
  I did, opened one random top result https://www.deskera.com/blog/journal-entries/ https://www.deskera.com/blog/journal-entries/ And got left/right as explanation and also as left and right columns
  - freedomben 3y ago
    Yeah, GP really undermined their point with the whole "google x" and see. For most people who aren't accountants though, the spreadsheet thing is correct.
  - fauigerzigerk 3y ago
    Clearly I overstated my case. I'm not denying that columns are often used, especially in educational material. It's just no longer as universal as it once was. https://www.accountingweb.co.uk/any-answers/vat-double-entry https://www.accountingweb.co.uk/any-answers/vat-double-entry
lisper 3y ago
> Debit means an entry in the left column. Credit means an entry in the right column But that just shifts the arbitrariness of the whole thing from the words "debit" and "credit" to the words "left" and "right".
- EvanAnderson 3y ago
  I think his intent was to prevent students from fixating on making the words debit and credit "mean" something by themselves. A debit doesn't have some intrinsic meaning about the "flow of money". It's just an entry in the left column. On the other hand, a debit to Accounts Receivable actually means something.
  - lisper 3y ago
    > A debit doesn't have some intrinsic meaning about the "flow of money". But it does. "Debit" is an English word with an established meaning in common usage. It means to take money out of an account. It is related to the word "debt" which is something that decreases the net worth of the debtor and increases the net worth of the creditor. If you overpay a bill, the (positive) difference between what you paid and what you owed is a credit on your account, and can be used just like money to pay your next bill.
    - pessimizer 3y ago
      > If you overpay a bill, the (positive) difference between what you paid and what you owed is a credit on your account Or it's a debit on the company's account. I think that's the point that was being made; not to confuse technical terms with English common usage, and not to go to the dictionary or etymology(!) as the arbiter. Debits are credits and credits are debits, but the real question is which column does it go into. Same nature as discussions about clients/servers.
      - lisper 3y ago
        > Or it's a debit on the company's account. That's exactly right. They owe you money, so it is (or at least it should be) a credit on your account, and a debit on theirs. But that is not what the definition given in the article says. TFA's definition of "credit" was "An entry that represents money leaving an account" and likewise a debit is "An entry that represents money entering an account." So when you paid your bill, that was (by the articles definition) a credit to your checking account and a debit to your account with company whose bill you were paying, which is exactly backwards. According to the standard English definitions, a credit is something that makes your net worth go up, and a debit is something that makes your net worth go down. So when you pay your bill, that should be a debit to you (cash going out decreases your net worth) and a credit to the counterparty (cash coming in increases their net worth). > Same nature as discussions about clients/servers. How so? It seems to me that distinction is clear: the client is the machine that initiated the connection, the one that did the DNS lookup.
rahimnathwani 3y ago
It sounds like your accounting instructor may have focused too much on implementation details (left/right), and too little on accounting principles. The terms debit and credit have meaning independent of their columnar position on a traditional ledger. I could create a ledger with the columns reverse or (shocking!) use a computer program with a data structure that doesn't encode the concept of left or right. I think about it like this: CR / Credit / Creditors -> what the business owes DR / Debit / Debtors -> what the business owns 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. A common objection to this is 'what about income and expense accounts'? But those are just equity: https://news.ycombinator.com/item?id=39991837 https://news.ycombinator.com/item?id=39991837 I wrote more about this here: https://news.ycombinator.com/item?id=32498992 https://news.ycombinator.com/item?id=32498992
- EvanAnderson 3y ago
  The sheer amount of discussion this has created (both here and back in August, 2022, when you and I commented back and forth to each other in your link) validates my my instructor's philosophy to me. Concentrating on the accounts and the accounting equation, ignoring any "meaning" for the words debit and credit, results in the "right answer" without a lot of consternation.
  - ChirronT447 3y ago
    I completely agree with this; I remember reading that prior thread on double entry accounting and being so frustrated and confused about the use of debit/credit terminology and then, as now, your comments (and others) were very very helpful and insightful. Something I find frustrating is the - almost - endless debate and nitpicking on small details or elements implied but not explicitly stated...but I guess people are trying to be helpful (or right). I didn't have an account to comment then but I really appreciated your perspective; it was extremely valuable seeing a few people saying 'forget about the credit/debit nomenclature, it's confusing' and recognising not everyone knows the terminology. Now I have an account here and can thank you for fighting the good fight again.
  - 3y ago

mikeyouse 3y ago

Right - the words themselves aren't as important as the concept. Any replacement word will suffer the same confusion. There's a reason that the language of debits and credits has largely remained the same for the past thousand years, and the language describing accounting is unlikely to be 'optimized' by first-principles CS concepts from people only loosely familiar with the field.

eviks 3y ago
There's a reason, but it's definitely not that any replacement is just as bad since that's close to an impossibly strong statement
grantc 3y ago
Well said. It's actually not complicated or arbitrary. It also works effectively in practice over the gdp of the known universe. If you are savvy enough to be interested in and understand the different computing approaches to double-entry bookkeeping, one can assume the whole DR/CR concept isn't beyond you.

fauigerzigerk 3y ago

And what if there are no columns? Google "journal entries for X" and you're going to find something like this: Dr accountX £100 Cr accountY £90 Cr accountZ £10 Left and right was fine when T accounts were universally used to record entries, but that's no longer the case.

eviks 3y ago
I did, opened one random top result https://www.deskera.com/blog/journal-entries/ https://www.deskera.com/blog/journal-entries/ And got left/right as explanation and also as left and right columns
- freedomben 3y ago
  Yeah, GP really undermined their point with the whole "google x" and see. For most people who aren't accountants though, the spreadsheet thing is correct.
- fauigerzigerk 3y ago
  Clearly I overstated my case. I'm not denying that columns are often used, especially in educational material. It's just no longer as universal as it once was. https://www.accountingweb.co.uk/any-answers/vat-double-entry https://www.accountingweb.co.uk/any-answers/vat-double-entry

lisper 3y ago

> Debit means an entry in the left column. Credit means an entry in the right column But that just shifts the arbitrariness of the whole thing from the words "debit" and "credit" to the words "left" and "right".

EvanAnderson 3y ago
I think his intent was to prevent students from fixating on making the words debit and credit "mean" something by themselves. A debit doesn't have some intrinsic meaning about the "flow of money". It's just an entry in the left column. On the other hand, a debit to Accounts Receivable actually means something.
- lisper 3y ago
  > A debit doesn't have some intrinsic meaning about the "flow of money". But it does. "Debit" is an English word with an established meaning in common usage. It means to take money out of an account. It is related to the word "debt" which is something that decreases the net worth of the debtor and increases the net worth of the creditor. If you overpay a bill, the (positive) difference between what you paid and what you owed is a credit on your account, and can be used just like money to pay your next bill.
  - pessimizer 3y ago
    > If you overpay a bill, the (positive) difference between what you paid and what you owed is a credit on your account Or it's a debit on the company's account. I think that's the point that was being made; not to confuse technical terms with English common usage, and not to go to the dictionary or etymology(!) as the arbiter. Debits are credits and credits are debits, but the real question is which column does it go into. Same nature as discussions about clients/servers.
    - lisper 3y ago
      > Or it's a debit on the company's account. That's exactly right. They owe you money, so it is (or at least it should be) a credit on your account, and a debit on theirs. But that is not what the definition given in the article says. TFA's definition of "credit" was "An entry that represents money leaving an account" and likewise a debit is "An entry that represents money entering an account." So when you paid your bill, that was (by the articles definition) a credit to your checking account and a debit to your account with company whose bill you were paying, which is exactly backwards. According to the standard English definitions, a credit is something that makes your net worth go up, and a debit is something that makes your net worth go down. So when you pay your bill, that should be a debit to you (cash going out decreases your net worth) and a credit to the counterparty (cash coming in increases their net worth). > Same nature as discussions about clients/servers. How so? It seems to me that distinction is clear: the client is the machine that initiated the connection, the one that did the DNS lookup.

rahimnathwani 3y ago

It sounds like your accounting instructor may have focused too much on implementation details (left/right), and too little on accounting principles. The terms debit and credit have meaning independent of their columnar position on a traditional ledger. I could create a ledger with the columns reverse or (shocking!) use a computer program with a data structure that doesn't encode the concept of left or right. I think about it like this: CR / Credit / Creditors -> what the business owes DR / Debit / Debtors -> what the business owns 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. A common objection to this is 'what about income and expense accounts'? But those are just equity: https://news.ycombinator.com/item?id=39991837 https://news.ycombinator.com/item?id=39991837 I wrote more about this here: https://news.ycombinator.com/item?id=32498992 https://news.ycombinator.com/item?id=32498992

EvanAnderson 3y ago
The sheer amount of discussion this has created (both here and back in August, 2022, when you and I commented back and forth to each other in your link) validates my my instructor's philosophy to me. Concentrating on the accounts and the accounting equation, ignoring any "meaning" for the words debit and credit, results in the "right answer" without a lot of consternation.
- ChirronT447 3y ago
  I completely agree with this; I remember reading that prior thread on double entry accounting and being so frustrated and confused about the use of debit/credit terminology and then, as now, your comments (and others) were very very helpful and insightful. Something I find frustrating is the - almost - endless debate and nitpicking on small details or elements implied but not explicitly stated...but I guess people are trying to be helpful (or right). I didn't have an account to comment then but I really appreciated your perspective; it was extremely valuable seeing a few people saying 'forget about the credit/debit nomenclature, it's confusing' and recognising not everyone knows the terminology. Now I have an account here and can thank you for fighting the good fight again.
- 3y ago