Define debit and credit

Answer 1

A debit card is a card that allows the bearer to complete a financial transaction by means of a PIN number. The amount paid is debited (deducted) immediately from a checking or savings account connected to the card. A debit card is very similar to paying with cash.

A credit card is a card that allows the bearer to complete a financial transaction with a signature. The amount paid is put onto a line of credit (a kind of loan), for which a bill is later sent to the bearer for payment. A line of credit need not be paid in full each month, so the bearer would incur interest on any unpaid amount. A credit card is very similar to a loan. I'm going to answer your question solely from an accounting standpoint, as those terms are used quite differently in other contexts. The standard bookkeeping system is double entry accounting. That simply means that every transaction generates two entries. Picture an old-fashioned scale, where you have to balance both sides. You can take the same amount from each side, add the same amount to each side, or add and subtract the same amount from one side or the other. In accounting, the left side is assets -- what you own -- and the right side is liabilities -- what you owe -- and equity, the difference between the two. Debits increase the left side and decrease the right; credits increase the right side and decrease the left. Some examples: I borrow money from the bank. Debit Cash -- an asset -- to increase it for the amount I borrowed. Credit Bank Loan -- a liability -- to increase it for the amount I owe. I pay back the bank. Credit Cash to decrease it for what I paid back. Debit Bank Loan to decrease it for the amount repaid. I pay cash for a car. Credit Cash, debit Cars -- an asset. In double entry accounting, debits are listed on the left and credits are listed on the right. More information: http://en.wikipedia.org/wiki/Debit A debit is a deduction and a credit is an addition.