[rahimnathwani]

It sounds like your accounting instructor may have focused too much on implementation details (left/right), and too little on accounting principles.

The terms debit and credit have meaning independent of their columnar position on a traditional ledger. I could create a ledger with the columns reverse or (shocking!) use a computer program with a data structure that doesn't encode the concept of left or right.

I think about it like this:

  CR / Credit / Creditors -> what the business owes
  DR / Debit / Debtors -> what the business owns

A CR entry is an increase is what the company owes (to creditors or shareholders), and a DR is an increase in what the company owns.

A common objection to this is 'what about income and expense accounts'? But those are just equity: https://news.ycombinator.com/item?id=39991837

I wrote more about this here: https://news.ycombinator.com/item?id=32498992

[EvanAnderson]

The sheer amount of discussion this has created (both here and back in August, 2022, when you and I commented back and forth to each other in your link) validates my my instructor's philosophy to me. Concentrating on the accounts and the accounting equation, ignoring any "meaning" for the words debit and credit, results in the "right answer" without a lot of consternation.

[ChirronT447]

I completely agree with this; I remember reading that prior thread on double entry accounting and being so frustrated and confused about the use of debit/credit terminology and then, as now, your comments (and others) were very very helpful and insightful.

Something I find frustrating is the - almost - endless debate and nitpicking on small details or elements implied but not explicitly stated...but I guess people are trying to be helpful (or right).

I didn't have an account to comment then but I really appreciated your perspective; it was extremely valuable seeing a few people saying 'forget about the credit/debit nomenclature, it's confusing' and recognising not everyone knows the terminology. Now I have an account here and can thank you for fighting the good fight again.

[rahimnathwani]

I agree that the accounting equation is a good starting point. Without it there is no context for the individual accounts.

Over the ~20 years since I qualified as an accountant, I've found the concept of debits and credits useful. It has saved me from memorizing rules (like what's on the left and what's on the right), to design charts of accounts, to design rules for recording transactions etc.

Someone who doesn't ever need to design charts of accounts or accounting policies, and is never called upon to verify the correctness of an accounting approach, probably doesn't need to understand debits and credits. They can read a balance sheet and income statement without thinking about the concept.

And many people (even bookkeepers and accountants) are content to memorize rules without needing to understand their source.

But that doesn't mean the underlying concepts don't exist, or that they aren't valuable.

Imagine if there were a subreddit for accountants, some of whom dabbled in coding. There might be a back and forth about principles of objects oriented design. The general consensus might be that it's pointless to understand the principles, and that it would be better to focus on some small set of rules of thumb, that give the right answer in most cases.

They might be right in that context (accountants who code on the side), but it doesn't mean the principles don't exist or aren't valuable for people who do that stuff all the time.

(BTW I think accounting is, in general, taught very poorly. I wish more instructors used Frank Wood's books. An intuitive grasp of debits and credits is really useful and not hard to pick up, yet many people spend a semester studying accounting without developing any intuition at all.)

[lurkingmba]

That's too simple. That logic roughly works the balance sheet. However, it says nothing about the income statement.

For the income statement, CR -> revenue and DR -> expense.

[rahimnathwani]

I addressed this earlier: https://news.ycombinator.com/item?id=39991837

When you record transactions in accounting, you're updating various account balances, such as assets, liabilities, and equity. These updated balances contribute to the creation of the balance sheet, which provides a snapshot of a company's financial position at a specific point in time.

The income statement, on the other hand, reflects the changes in these balances over a period of time. There's nothing special about the line items on the income statement (e.g. revenue or expense). Any value on the income statement represents a change in what the company owns (assets) or what it owes (liabilities or equity).