Accounting System

The idea of debit and credit

2016/10/14

Debit card and credit card

When you open an account at a bank in Indonesia, you will find a Kartu ATM (cash card) with a Kartu Debit (debit card) feature, so almost 100% of Indonesians with a normal social life will have a debit card.

I asked my wife about the difference between a debit card and a credit card.

  • Debit is your money, credit is your money to borrow

But I think this is a way of understanding that gets to the heart of the matter.

In accounting terms, money, which is the source of payment, is an asset subject, so the normal balance is a debit.

A debit card is a card issued by a bank and paid from the money in your account, while a credit card is a card issued by a credit card company and paid by borrowing money from the credit card company.

I think this is probably the most confusing point, as debit is an asset (debit side) and credit is a liability (credit side) if you think about the source of the payment.

Debit notes and credit notes.

What's more complicated is the debit note and the credit note, and when I first came to Indonesia, I got angered by a customer who had taken too long with the project.

  • We will charge you for the delay by debit note.

I thought to myself, "What's this all about?".

A system company issues an invoice to a customer when billing the customer for services, but the customer issues a debit note when the installed system does not work properly and the customer gets angry and says, "Return the money you've paid.

From a systems company's point of view, they will issue a credit note for the amount invoiced on the invoice when they reduce it indirectly, rather than directly with a negative invoice.

In other words, a debit note is a debit (debit) because it is partly returned (increase in assets) after the money has been paid (decrease in assets), and a credit note is a credit (credit) because it is partly returned (decrease in assets) after the money has been paid (increase in assets) and is used for claims where no payment has been received.

By reducing assets indirectly, such as accumulated depreciation, allowance for doubtful accounts, and transfers to other accounts, it makes sense to leave clear evidence of how much was originally accrued.

The meaning of the word "to credit

I purchased the software and an additional license (for two users), and one month later, due to the software version upgrade, the new version can be used for three users without an additional license, but the additional license purchased with the old version was called "di-creditkan".

  • di-creditkan" itu maksudnya apa ya?(What do you mean by "di-creditkan"?)

on hearing that ...

  • hilang(Vanishes = expires.)

I understood what he meant.

The point is that it's hard to say "di-batalkan", so I think I said "di-creditkan", which is a bit difficult to say, but the point is that a decrease in license = a decrease in assets, so it's a credit.

We also use shutterstock photos on this blog, but some photos require editorial credit, so we will include the author's name, shutterstock.com, and a link below the photo.

In other words, it is a credit because it makes it clear that "this picture is not yours, but is owed" (incurring a debt).