The Mysterious Priesthood

[mishalak]

I like accounting. No I really do, I like knowing all these things about how things work and so on. It is real work to do, even with computers, but it is not nearly as hard to understand as it seems from outside. It is just obscured with technical terminology, as are most professions from plumbing to nuclear physics. Oh sure the simplified version is only a map of the territory, not the territory itself, but I think most of these things would be more respected rather than less if people understood what goes into them.

To that end I think I will occasionally expound upon some aspect of accounting that I find interesting in a non-technical sort of way.

Today I am going to start off with a very old accounting joke. "No accountant should be called a credit to his profession, he should be a debit." At this point most accountants will grin or laugh politely, it is not a terribly funny joke. The reason for it goes to what credit and debit actually mean in accounting, they are just a fancy way of saying left (debit) and right (credit). In double entry bookkeeping every addition to the left side of an account must be offset somewhere else by an addition to the right side. Most asset accounts are debit positive, that is if they are a positive amount it is put in on the left side and to take the asset away you put in an amount on the right side. The general public thinks of credit as being the positive "I've got money" thing because banks use double entry bookkeeping and to them the money in a customer's account is a liability, something they owe to someone else. Therefore a positive balance or addition goes on the right side and is called a credit, and now it becomes obvious why debit cards and credit cards are called what they are.

Credit Cards = Right Side balance something the bank is owed Cards

Debit Cards = Left Side balance something that the bank no longer owes Cards

Comments

[aylinn.livejournal.com]

*G*

I like the title.

I always, always remember basic bookkeeping via the "what does cash end up doing?" rule/theory.

IOW, figure out whether cash goes up/down & trace out the appropriate opposite chain of reactions. Cash = debit side. Always.

[mishalak.livejournal.com]

Not a bad way to do it. I ended up remembering it because it made so much sense that anything the bank considered a credit would be a corresponding debit to me.

[nikulai.livejournal.com]

I could never remember if debits went to the window or the chalk board...

[mishalak.livejournal.com]

I do not know that memory trick so I could not say.

[nikulai.livejournal.com]

Well, it depends on the layout of the class room, really...

Interesting jacket - I like it.

[mishalak.livejournal.com]

Is a Norwegian sweater actually, but thanks.