Difference Between Credit And Debit Transactions In Accounting

According to the Rules of Debit And Credit, in a Business Transaction, there is always both Debit and Credit Accounts involved when it occurred and these Types of Accounts are written either on the Debit Side / Left Side or Credit Side / Right Side of an Account. Those accounts which are debited in the Transactions are Debit Accounts and from point of a business and such transactions are known as Debit Transactions while from the point view of other business, it is a Credit Transaction. So, such transaction is known as Credit Transaction for the other business . Credit Transactions are recorded on the Right Side or Credit Side of Credit Accounts.

You Can Also Read Out, “What is the Difference Between Debit And Credit”

Let’s us consider an example in order to understand the above point.

 

For Example, Mr. A Purchases Goods Worth Rs. 5000 from his supplier (Mr. B) for goods supplied to him, then, here from the point view of our Mr. A’s business, this is a Credit Transaction as he is purchasing the goods from Mr. B on Credit Basis, so he sent a Debit Note to the seller. Moreover, there are two accounts involved in it. First one is Purchases Account that is created as a result of purchasing of goods from Mr. B on account or credit basis and it is increasing as a Direct Expense. Also, Mr. B (Accounts Payable) is Credited as we made payment to him as shown below:

                                                           Purchases a/c   5000

                                                                                 Mr. B    5000

(Purchase Goods Worth Rs. 5000 From Mr. B)

From the point view of Mr. B’s business, it is a Debit Transaction as he sold goods to Mr. A, so he sent a Debit Note to the buyer, then he passed the following Journal Entry in the Accounts Receivable Subsidiary Ledger (i.e., Mr. A’s Ledger):

                                                                  Mr. A    5000

                                                                               Sales a/c   5000

(Sold Goods Worth Rs. 5000 To Mr. A)

Also, Read Out, “Difference Between Debit Note And Credit Note”

Mr. A as a Accounts Receivable or Debtor is increasing as Mr. A becomes the debtor after receiving the goods as specified by him. As Sales is made because goods are going out of the business of Mr. B on Account, so we credit it.