Debit / Credit

[Shahid_fss]

<b>There is no need to explain Dr and Cr to other people because when the information is given to general public it is in the form of statements (+/-) rather then Dr/Cr.</b>

<b>Well if someone forces me to define Dr and Cr I will define them as</b>
<u>Debit and Credit items</u>
When an item brings favorable effects for your business (business, not you) it is called Dr and vise versa.
<u>Debit and Credit sides</u>
Where a favorable Item is written is called Dr Side and where an unfavorable item is written is called Cr Side.

<b>Let’s prove (considering the habit of forum members to put objections - joking)</b>
<u>By favorable we mean better financial position</u>
If the value of total assets is increasing due to increase in the value of asset A, you’ll debit “A” because it is favorable for your business.
If the total liabilities reduce due to decrease in liability “X” you’ll debit it because it is favorable.
Considering drawings an asset (Although many people don’t accept it but according to rule it is correct), drawings are always debit because due to them total liabilities are reduced, favorable.
<u>By unfavorable we mean bad financial position</u>
If the value of total assets is decreasing due to decrease in the value of asset A, you’ll credit “A” because it is unfavorable for your business.
If the total liabilities increase due to increase in liability “X” you’ll credit it because it is unfavorable.
Considering capital a liability (Although many people don’t accept it but according to rule it is correct), capital is always credit because due to this total liabilities are increased, unfavorable.

<b>Always remember</b>
All those items due to which total assets or expenses increase are debit
All those items due to which total liabilities or incomes decrease are credit
If you remember these to lines, you’ll never feel any problem in Dr and Cr.

<b>
All discussion given above is totally proved 100% in computerized accounting system based on “artificial intelligence”.</b>

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