The Concept That Assets Are Debits and Liabilities Are Credits

When considering the source of payment, a debit represents an asset (debit side), while a credit represents a liability (credit side). A debit can also be seen as the right to claim, and a credit as the obligation to be claimed, implying that it grants the other party the right to issue a debit note.

Accounting System in Indonesia

The cloudification of accounting systems is advancing in Indonesia, with the three major local cloud systemsAccurate, Zahir, and Jurnalleading the market. However, in reality, it is said that fewer than 8% of domestic companies have implemented accounting systems. This is why new cloud-based accounting systems continue to be launched in what might seem like an already saturated Indonesian market. It suggests that both domestic and international IT startups see significant potential for cloud accounting systems to expand their market share locally. In Indonesia, automated journal entries due to the widespread use of accounting systems have become commonplace, and over the ...

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Debit Cards and Credit Cards

When you open a bank account in Indonesia, the Kartu ATM (cash card) comes with Kartu Debit (debit card) functionality. For Indonesians living a typical social life, this means nearly 100% of them have a debit card.
When I asked my wife about the difference between a debit card and a credit card, she replied lazily:

Debit is your own money, credit is borrowed money.

This is a pretty spot-on way to grasp the essence, I think.
From an accounting perspective, since the source of payment—money—is an asset account, its normal balance is on the debit side (debit).
A debit card is issued by a bank and uses money from your own account for payment, while a credit card is issued by a credit card company and involves borrowing money from them to pay.
When viewed from the source of payment, debit is an asset (debit), and credit is a liability (credit)—probably the most confusing point here.

Debit Notes and Credit Notes

Things get even trickier with debit notes and credit notes. When I first came to Indonesia, I had a client I upset due to a prolonged project, and they said:

We will bill you for the delay with a debit note.

I was like, “What’s that supposed to mean?”
When a system company bills a client for services, it issues an invoice. But if the implemented system doesn’t work well and the client angrily demands, “Give me back the money I paid,” the client issues a debit note.
From the system company’s perspective, instead of directly reducing the invoiced amount with a negative invoice, they indirectly reduce it by issuing a credit note.
In short, a debit note is used after paying money (asset decrease) to get a portion back (asset increase), making it a debit (debit side). A credit note is used after receiving money (asset increase) to refund a portion (asset decrease), making it a credit (credit side). Both are used for claims without physical receipts or payments.
Like accumulated depreciation, allowance for doubtful accounts, or inter-account transfers, indirectly reducing assets serves to clearly document the original amount as evidence.

Deducting from Manufacturing Costs or Cost Of Goods Sold via Inter-Account Transfer

When defective materials or spoilage (spoilage after becoming work-in-progress) occur, rather than directly reducing work-in-progress (or manufacturing costs like material costs or processing costs), transferring them indirectly to other accounts through inter-account transfers is the same as with depreciation or allowance for doubtful accounts.

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The Meaning of “To Credit”

Last year, I bought software and an additional license (totaling licenses for 2 users). A month later, a version upgrade expanded functionality, allowing the new version’s base software to support 3 users without the extra license. That was fine, but the additional license I bought for the old version was said to be “di-creditkan.”

"di-creditkan" itu maksudnya apa ya? (“What does ‘di-creditkan’ mean?”)

I asked, and they replied:

hilang (It disappears = it’s voided).

That’s when I finally understood.
Basically, they avoided saying “di-batalkan” (canceled) and used the fancier “di-creditkan.” It means a reduction in licenses = a decrease in assets, hence a credit.
Also, this blog uses Shutterstock photos, some of which require credits (mandatory editorial notation). In such cases, I list the author’s name, “shutterstock.com,” and a link below the photo.
This indicates “this photo isn’t mine; it’s borrowed” (incurring a liability), making it a credit (credit side).