Credit vs. Debit

By Jaxson

  • Credit

    Credit (from Latin credit, “(he/she/it) believes”) is the trust which allows one party to provide money or resources to another party where that second party does not reimburse the first party immediately (thereby generating a debt), but instead promises either to repay or return those resources (or other materials of equal value) at a later date. In other words, credit is a method of making reciprocity formal, legally enforceable, and extensible to a large group of unrelated people.

    The resources provided may be financial (e.g. granting a loan), or they may consist of goods or services (e.g. consumer credit). Credit encompasses any form of deferred payment. Credit is extended by a creditor, also known as a lender, to a debtor, also known as a borrower.

    Adam Smith believed that barter preceded credit in history, but most recent anthropological research proved otherwise. Barter mostly took place between those individuals who lack trust with one another e.g. hostile or unknown tribes usually made their transactions via barter. On the contrary, members of the same tribe mostly settled their transactions in creditdebt.

  • Debit

    In double entry bookkeeping, debits and credits (abbreviated Dr and Cr, respectively) are entries made in account ledgers to record changes in value resulting from business transactions. Generally speaking, the sources for spending money in transaction account is credit (that is, an entry is made on the right side of the account’s ledger) and what the money obtained with the credits is destined as debit in transaction accounts (that is, an entry is made on the left side). As used here, credits could include share capital, revenues, etc., while debits could be assets, dividends, and so on. From a technical point of view, the sides refer to the balance sheet placement of accounts. Total debits must equal total credits for each transaction; individual transactions may require multiple debit and credit entries to record.

    The difference between the total debits and total credits in a single account is the account’s balance. If debits exceed credits, the account has a debit balance; if credits exceed debits, the account has a credit balance. For the company as a whole, the totals of debit balances and credit balances must be equal as shown in the trial balance report, otherwise an error has occurred.

    Accountants use the trial balance to prepare financial statements.

  • Credit (verb)

    To believe; to put credence in.

    “Someone said there were over 100,000 people there, but I can’t credit that.”

  • Credit (verb)

    To add to an account (confer debit.)

    “Credit accounts receivable with the amount of the invoice.”

    “For the payroll period credit employees’ tips to their wages paid account and debit their minimum wage payable account.”

    “The full amount of the purchase has been credited to your account.”

  • Credit (verb)

    To acknowledge the contribution of.

    “I credit the town council with restoring the shopping district.”

    “Credit the point guard with another assist.”

  • Credit (verb)

    To bring honour or repute upon; to do credit to; to raise the estimation of.

  • Credit (noun)

    Reliance on the truth of something said or done; faith; trust.

  • Credit (noun)

    Recognition and respect.

    “I give you credit for owning up to your mistake.”

    “He arrived five minutes late, but to his credit he did work an extra ten minutes at the end of his shift.”

  • Credit (noun)

    Acknowledgement of a contribution, especially in the performing arts.

    “She received a singing credit in last year’s operetta.”

  • Credit (noun)

    Written titles and other information about the TV program or movie shown at the beginning and/or end of the TV program or movie.

    “They kissed, and then the credits rolled.”

  • Credit (noun)

    A privilege of delayed payment extended to a buyer or borrower on the seller’s or lender’s belief that what is given will be repaid.

    “In view of your payment record, we are happy to extend further credit to you.”

  • Credit (noun)

    The time given for payment for something sold on trust.

    “a long credit or a short credit”

  • Credit (noun)

    A person’s credit rating or creditworthiness, as represented by their history of borrowing and repayment (or non payment).

    “What do you mean my credit is no good?”

  • Credit (noun)

    An addition to certain accounts.

  • Credit (noun)

    A reduction in taxes owed, or a refund for excess taxes paid.

    “Didn’t you know that the IRS will refund any excess payroll taxes that you paid if you use the 45(B) general business credit?”

  • Credit (noun)

    A source of value, distinction or honour.

    “That engineer is a credit to the team.”

  • Credit (noun)

    An arbitrary unit of value, used in many token economies.

    “To repair your star cruiser will cost 100,000 credits.”

    “Would you like to play? I put in a dollar and I’ve got two credits left.”

  • Credit (noun)

    Recognition for having taken a course (class).

    “If you do not come to class, you will not get credit for the class, regardless of how well you do on the final.”

  • Credit (noun)

    A course credit, a credit hour – used as measure if enough courses have been taken for graduation.

    “Dude, I just need 3 more credits to graduate – I can take socio-linguistics of Swahili if I want.”

  • Debit (noun)

    In bookkeeping, an entry in the left hand column of an account.

    “A cash sale is recorded as debit on the cash account and as credit on the sales account.”

  • Debit (noun)

    A sum of money taken out of a bank account. Thus called, because in bank’s bookkeeping a cash withdrawal diminishes the amount of money held on the account, i.e. bank’s debt to the customer.

  • Debit (verb)

    To make an entry on the debit side of an account.

  • Debit (verb)

    To record a receivable in the bookkeeping.

    “We shall debit your account for the amount of the purchase.”

    “We shall debit the amount of your purchase to your account.””

  • Debit (adjective)

    of or relating to process of taking money from an account

  • Debit (adjective)

    of or relating to the debit card function of a debit card rather than its often available credit card function


Leave a Comment