[EvanAnderson]

> > Without the context of the specific accounts being debited or credited the terms themselves mean nothing."

> This seems incorrect to me.

You can't derive the change in assests, liabilities, or equity without know which accounts are being debited and credited. The terms "debit" and "credit" themselves don't tell you anything by themselves. Without the context of accounts the terms are meaningless. I think programmers get hung-up on thinking that they have meaning in isolation (i.e. thinking that "a debit means somebody owes us money").

> I think of it as 'owing' (liability) or 'owning' (asset).

> When you credit an account, you either increase what you 'owe' on that account OR decrease what you 'own' on that account.

That's my point. When you know they type of account being debited or credited you can reason about how it affects the balance of the account and the managerial context of the transaction (i.e. "somebody owes us money because the debit was to a receivable account").

[rahimnathwani]

"When you know they type of account being debited or credited you can reason about how it affects the balance of the account and the managerial context of the transaction"

This is true, but it doesn't negate my point (that debit and credit have meaning independent of the type of account).

I know this because I have used the principle many times in practice, to define charts of accounts, to define rules for posting different types of transactions etc.

[EvanAnderson]

I think we're talking past each other but I'm not sure how to rectify.

Given a debit of $500 and two matching credits of $250 how is the owner's equity position affected?

A programmer, unfamiliar with accounting, might think that "debit" and "credit" carry enough meaning in this context to answer the question.

You and I know that without knowing what account types are being debited and credited we have no way of explaining what the managerial result of that entry is. That's an unanswerable question w/o more context. That's my point.

[rahimnathwani]

"I think we're talking past each other but I'm not sure how to rectify."

Let me give it one last try :)

You're claiming the truth of two propositions:

A) Without the context of the specific accounts being debited or credited the terms [debit and credit] themselves mean nothing.

B) Without the context of the specific accounts being debited or credited we have no way of explaining what the managerial result of that entry is.

I agree with B, but do not agree with A.

When an account is CREDITED, this always represents an increase in liabilities[0] (or equivalently, a decrease in assets).

When an account is DEBITED, this always represents an increase in assets (or equivalently, a decrease in liabilities).

The two statements above are true as written. If you were to exchange the capitalized text (turning CREDITED into DEBITED and vice versa), the statements would no longer be true. Therefore credit and debit each have some distinct meaning.

[0] I treat 'shareholders equity' as being a liability in favour of shareholders

[onefuncman]

> When an account is CREDITED, this always represents an increase in liabilities[0] (or equivalently, a decrease in assets).

> When an account is DEBITED, this always represents an increase in assets (or equivalently, a decrease in liabilities).

This is where you're wrong. You can credit and debit Accounts Payable and Accounts Receivable. If you credit AP, you're increasing liability, if you credit AR, you're increasing assets.

[rahimnathwani]

"If you credit AP, you're increasing liability, if you credit AR, you're increasing assets."

This is incorrect. If you credit AR, you're decreasing assets.[0]

[0] https://www.freshbooks.com/hub/accounting/debit-and-credit#:....

[jessaustin]

Your link shows that AR is a subaccount of Assets and AP is a subaccount of Liabilities, so credits to each have the opposite effect with respect to a balance sheet. GP has a different understanding of the "polarity" of debits and credits, but if anything this seems to support rather than undermine proposition "A" above?

[jwarden]

rahimnathwani is correct here and has explained himself well. I generally don’t think of equity as a liability, but if you think of it is money owed to shareholders, then a credit can indeed be seen as an increase in money owed. Since debits always equal credits,

money OWNed = money OWed

And thus:

Assets = Liabilities + Equity