DEBITS AND CREDITS IN ACCOUNTINGPart 1 - The history and definition by NowMaster Accounting.

Venetian method – 1500s

First used by the Venetian merchants in Italy in the 15th century

Codified by the mathematician Luca Pacioli in 1494 - ‘The father of accounting’

Key part of the ‘Double-entry bookkeeping’ system

‘Credre’ and ‘Debere’

Developed at a time when negative numbers were not generally accepted in mathematics

Translated from the Latin ‘Credre’ (which means ‘to entrust’) - ‘Debere’ (which means ‘to owe’). (Dr. abv. Is taken from the Latin)

Evolving English

In the 500 years since these terms were translated from Latin to English, English has evolved significantly

The term ‘credit’ today has over 10 different meanings including purchasing goods without paying immediately or obtaining finance from a bank

Definition of Debits and Credits

‘Debit and Credit’ has its own special meaning in accounting.

The “Debits and Credits” system captures and records the flow of economic resources from a source (credit) to a destination (debit). It also ensures that the accounting equation remains in balance after each transaction is entered.

Summary

‘Debits and Credits’ are part of a 500 year old double entry bookkeeping system.

English has evolved to create many different meaning for the terms ‘Debit and Credit’

The meaning of ‘Debits and Credits’ in accounting is unique and not to be assimilated with other meanings of these terms.

Debits and Credits is a classification system used for recording the financial transactions of a business.

Debits and Credits (1) reflect the flow of economic resources from a source (Credit) to a destination (Debit) as well as maintains the integrity of the accounting equation after each new transaction entry.