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Debits and Credits

 

The terms Debit and Credit refer to the General Ledger effects of transactions.

 

A common Receivables transaction is an Invoice to a Customer. The General Ledger effect of a typical Invoice transaction is to Debit the Receivables Subledger Control Account for the Amount of that Invoice and to Credit other Accounts such as various Revenue Accounts and Sales Tax Liability accounts. The total Debits equal the total Credits.

 

Another common Receivables transaction is a Payment received from a Customer. The General Ledger effect of a typical Payment transaction is to Credit the Receivables Subledger Control Account and to Debit the Bank Account (and the Cash Discounts Granted Account if applicable). As always, the total Debits equal the total Credits.

 

Complete details of the General Ledger distribution of Receivables transactions are stored in the transaction detail table. This includes the Debit or Credit to the applicable Receivables Subledger Control Account. These amounts are always displayed and printed using separate columns for Debits and Credits. Internally the system uses a single amount field to store these values rather than use two separate fields. That amount field uses the standard convention where positive values represent Debits and negative values represent Credits. However, when these amounts are displayed or printed they are shown in separate columns for Debits and Credits.

 

The transaction table stores all the other information about the transaction, including the original Receivables Amount and the current Balance of that transaction. Common practice when displaying or printing these Amounts and Balances is to use a single column rather than separate columns for Debits and Credit.

 

From the perspective of presenting and processing transactions there are basically only two kinds of transactions: those which are a Debit to the Receivables Subledger and those which are a Credit to the Receivables Subledger. The most typical Debit transaction is an Invoice to a Customer and the most typical Credit transaction is a Payment received from a Customer. For readability this guide often uses the term Invoices to refer to any Debit transactions and the term Payments to refer to any Credit transactions.