Learning Accounting: Debit and Credit Basics

When learning accounting for the first time, the terms 'debit' and 'credit' can be a bit confusing. Why? Because when you go to the bank and deposit money, the teller will tell you, "I am crediting your account X amount of dollars," but if you are taking money our of your account, the teller will tell you, "I am debiting your account X amount of dollars." Also, with debit machines all over the place, and credit cards in everyone's pocket, the two accounting terms take on a whole new meaning.

However, what we've learned about these two words so important in the accounting world, debit and credit, have to be unlearned quickly. Why? Because in accounting, the term debit is used to describe a bank account and that money owed are actually credit accounts - the exact opposite of what we've been taught elsewhere.

In accounting terms, neither credits nor debits are 'bad', but they need to equal each other in order to balance themselves out in the end. Every itemized transaction, no matter if it's a deposit or a bill to be paid has both a debit and credit posted in the accounting world. This is what is called 'double-entry accounting' - so when you go to the bank, and the teller says, "I am crediting your account X amount of dollars," she is also debiting an entry of a similar amount without telling you this. The same goes for when the teller tells you, "I am debiting your account X amount of dollars," - the accounting will show that a credit of the same amount is being made elsewhere at the same time.

The easiest way to figure out debits and credits in accounting terms is to figure out the following: what did you receive, and where did it come from. The debit is what you received, and the credit is where you received it from, in accounting terms. So for demonstration sake, let's say you bought a CD with your credit card. The CD is what you got, so it will be a debit in the accounting world, and the credit will be applied to the liability you carry on your credit card for the exact same amount.

The bank can easily confuse people learning about credits and debits in the accounting sense of the words, especially when discussing liability. For instance, when you put money in the bank, the bank's liability to you increases, and since liabilities are credits, they are crediting your account (in accounting terms). And when the bank lowers their liability to us (by us taking money out of the bank) the banks are debiting the liability account, from an accounting perspective.

Basically it comes down to being able to figure out what you got and where exactly it came from; if you can figure these out for every transaction, then you've got the accounting terms of credit and debit down pat.

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Types of Credit Card Merchant Accounts

To accept credit card payments, you need to hire a merchant account service provider responsible for processing the credit card transactions. This service provider has to offer you a processing solution with features, rates, terms, service and incentives that are best suited to your business needs. A good place to start, prior to selecting your credit card processing solution, is to know the different types of merchant accounts available. Understanding the different merchant accounts and their features will enable you to understand the type of credit card processing solution you should go for.

Two-types of merchant accounts

They can be separated into two main categories:


Card-present merchant accounts
Card-not-present merchant accounts
Rates and fees applied to these accounts are determined on the basis of a simple rule:

Higher rates and fees are charged to merchants who accept credit card transactions that are considered to pose a higher risk.

Given this information, one can immediately deduce that rates charged on card-present merchant accounts are going to be generally lesser than those charged on card-not-present merchant accounts.

Card-present merchant account

Let us look at card-present merchant accounts a little further. The only way to qualify for a card-present transaction, which requires both the credit card and the customer to be physically present at point of sale, is to swipe the credit card in a terminal (a magnetic strip reader) that captures the data electronically. Hence, a card-present merchant account holder must invest in some form of hardware that enables the process of electronic data capture.

Card-present merchant accounts can be further sub-categorized into two, based on the selected processing solution:


Non-portable processing solution
Portable processing solution

Non-portable processing solution is often preferred at retail locations. Credit card processing hardware is connected to phone lines or modems. When credit cards are swiped through the hardware, data is captured and real-time authorization is obtained. The costs involved are usually less than those incurred by a portable processing solution.

Portable processing solution may or may not be able to obtain real-time authorization. For example with a wireless merchant account, you enjoy real-time authorization with a portable magnetic card reader. However, as you may guess, it involves higher hardware costs and monthly rates.

A store-and-forward merchant account also provides a portable processing solution. The hardware used is often a similar portable magnetic card reader too. However, it can store the credit card data at point of sale and the merchant can forward these transaction details for processing at a later time when a phone line is available. The rates charged on this account is less than those charged on a wireless merchant account. A store-and-forward merchant account is also more affordable than card-not-present merchant accounts as it involves less risk. It is suitable for business on the move with large sales volume and smaller ticket sales.

Card-not-present merchant account

Usually, the cheapest card-not-present merchant account is the mail order merchant account (MOTO). All you need is hardware to manually key in information of the customer's credit card.

With an internet merchant account, you can start to accept credit card transactions over the net. The credit card processing software required for this purpose is usually affordable and comes with security features. It is essential for an online business.

The last card-not-present merchant account employs a latest innovation and is referred to commonly as telephone merchant account. It is probably the easiest to use as it requires only your mobile phone or a telephone. It gives you portability and you can accept payments on the go. With no hardware cost involved, it is truly value for money. Every business is unique and you must recognize your specific business type and needs. Find the most suitable match in merchant account and hire a merchant account service provider which will not only help you make money but also to save money. Ensure that the increase in sales brought about by your credit card processing solution is greater than the costs incurred by investing in the solution.

Most Americans own at least one credit card. And of the seven in ten who do, an amazing 34 percent do not know the interest rate of the credit card they use most often. It is very easy to get a credit card. But it's very difficult to pay back your bills in full. Our expenses are increasing month after month. Whereas our income increases only year after year. So, it's very important for us to understand what credit card means to us today. Visit our Website to get all facts and Information about?Credit and Credit Card.

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Uses of Credit Notes in Accounting

Hello friend... I hope you are doing well. Today I am going to vow you about the uses of a credit notes in accounting. These are a type of source documents in accounting. I hope it will shed more light on the same. This document is veteran to nick overcharge. An overcharge is where the invoice had been overstated either by the creditor or the seller. There are different types of credit notes. These include;



I. Outgoing credit note; this is faded to slash credit sale made to the creditors. It is issued when goods sold on credit to the debtors are returned by them. This implies that the amount owed by the debtors to the organization is reduced. Outgoing credit notes are recorded on sales returned inward book.



II. Incoming credit note; This is issued by the creditors to the business. When you prefer goods on credit from the suppliers then some of the goods are returned by you to the supplier, then the amount that you are supposed to pay the supplier is reduced. This is done by the supplier on thunder of a credit impress. Lastly, all the incoming credit label is recorded on the purchases return day book.



I hope that information was of consume to you, whether you want to begin your believe business online or offline, you need these type of books. They are very vital in your accounting ventures. These are the standard tools that every business needs to survive. Have a nice day!

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