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Concept definition

Payment reminder

The next day after the expiration of the payment period, a reminder must be made. A standard letter, printed out by a cheap printer on poor paper and addressed simply to the accounting department, will certainly not have any result. Most likely, it will be mistaken for postal waste paper and immediately credited to the wastebasket.
When accepting an order, you should find out the name, position and address of the person responsible for payment. If it is an international company, then it may be necessary to send invoices to a regional or head office located in another country. The payment reminder must be addressed to the appropriate person. It should inquire about the existence of any reason for non-payment and ask to report it immediately. In this case, it is better to use not international airmail, but fax.

• Subsequent phone calls

If the payment is not received within 7 days after the payment reminder, you should call the person responsible for payments. If the answer is unsatisfactory, you need to call the manager who made the order and ask for payment without further delay. If any excuses, reasons or justifications appear, they must be dealt with immediately. Sometimes it takes two or three weeks to dispel any doubt, which is tantamount to extending the loan to the buyer simply because of the incompetence of the manager.

• Next steps

If the payment does not arrive, further action must be taken within a few days. Procrastination, or rather, postponing, is likely to significantly reduce the chances of getting any payment at all. Depending on the amount and the country, you should contact either a debt collection agency or a lawyer.

Bank loan

Loans in a banking institution are one of the most common types of lending, which is characterized by four components: monetary form, urgency, payment, purpose.
That is:
1) Banking institutions provide loans exclusively in cash - national or foreign currency.
2) Obligations under the loan agreement have a predetermined period during which the client is obliged to repay the entire amount of the debt, together with interest. Otherwise, the borrower becomes a debtor. Also, the principle of urgency suggests that funds are issued for temporary use, and not for ownership.
3) The money that the client will return to the bank at the end of the loan period will increase by the amount in the form of a certain percentage of the loan amount. This is a payment to the bank for the use of its assets.
4) The amount of the loan depends on the goals that the client cannot achieve with his own financial resources. The bank is taking measures to ensure that borrowed money is used strictly for its intended purpose, if it is not a consumer loan.

Do not rush to sign on the loan agreement of the bank you like. Before you take it, try carefully, without pressure from the clerks, to study all the features of the chosen program. A standard loan consists of only two parts: the main (loan body) and the interest part. As a rule, modern banks like to add all sorts of additional commissions and fees to the contract, which they “forget” to indicate in advertising brochures. This is how the third, hidden part of the loan appears, which the borrower also has to repay. Some banks advertise a low interest rate on a loan, but to cover additional costs they set an increased percentage for the first or last month.

Credit application

Modern borrowers apply for a loan not only at a bank branch, but also on the website of the institution they like online. Recently, the popularity of online loans has increased rapidly. As a confirmation of the request, a potential client receives an SMS or calls back the manager of a credit institution. After that, the money is transferred immediately to or issued at the branch at the specified address. Today in Russia there is one bank that is considered the "champion" in issuing online loans. This is the bank Tinkoff Credit Systems. The rates are slightly higher than for similar products of other institutions, but you can really get a loan without leaving your home.

Loan calculator

The loan calculator is a convenient tool for planning financial opportunities and calculating the amount of the monthly payment, taking into account all additional fees. Some calculators even offer the service of calculating the effective interest rate on a loan (the real interest that a borrower pays for using money).

The loan calculator gives an approximate, but at the same time quite a clear estimate of the upcoming level of expenses. Thanks to the tool, you will quickly understand how individual calculation methods, interest rates, and loan terms affect the final amount payable.

Bank loan

In recent years, the procedure for obtaining a loan at a bank has been significantly simplified and reduced. To apply for a loan, it is enough to bring your passport, TIN and SNILS with you. Loans are available to any citizen of the Russian Federation who has a permanent registration in one of the regions of the country.

To apply, just contact a bank employee for a free consultation. The decision is made from several hours to several days. Small amounts are issued without proof of income, collateral and guarantor. To get a loan for a serious amount, you need to convince the bank of your own solvency or provide valuable property as collateral.

Credit without references

A loan without income certificates is one of the varieties of an express loan, which does not require the involvement of a guarantor and confirmation of income with the help of additional documents. The registration process takes no more than a couple of hours. The package of documents consists of a passport and any other document (the client chooses a convenient option from the list provided). At first glance, everything looks very attractive. The price for convenience is an increased interest rate. Less significant disadvantages are short repayment period and limited amount limit.

Cash loan

A cash loan is perhaps one of the most popular banking products. Such loans have no intended purpose, so they can be used to make repairs, go on a trip, or finally make a long-awaited purchase.

A cash loan has specific advantages:

1. The minimum package of documents for applying.
2. Quick decision making, mainly in favor of the borrower.
3. In most cases no collateral or guarantee is required.
4. Several convenient payment methods are available.

Loan online

Online loans are becoming more popular in our country due to the ease of registration and availability. Even the main bank of the Russian Federation, Sberbank, actively practices the issuance of loans on the Internet. Before submitting an application, you will need to register on the official website of the institution and log in to the Sberbank Online system.

If the registration was successful, just click on the "Online loan application" item and fill out a simple questionnaire. After choosing the type of loan and answering simple questions, your application is sent for consideration.

consumer credit

Consumer credit is most often issued to buyers of popular goods. This type of loan also has its obvious advantages:

1. Almost instant registration, which takes from 10 to 30 minutes. Borrowers appreciate the opportunity to resolve a financial issue in a short time.
2. Really loyal conditions. Insurance contracts, income statements, guarantors and collateral are almost never required.
3. Repayment is available in any convenient way. It is possible to pay off obligations ahead of schedule.
4. Registration is often accompanied by additional bonuses. The bank offers customers plastic, the opportunity to open a deposit at a favorable percentage and other financial products.

What is a mortgage loan?

A mortgage loan is a large amount for the purchase of a home with a long repayment period. As collateral, a house or apartment, issued in a mortgage, is used. Sometimes real estate, which is owned by the borrower, is issued as collateral.

Mortgages have lower interest rates. But the requirements for potential borrowers are very high. Confirmation of a solid income and an impressive work experience are required without fail.

In recent years, almost all banks require, as an additional condition, to insure the life of the borrower, property located in or both objects at once.

What is a loan rate?

The loan rate, also known as the interest rate or interest on a loan, is the cost of borrowing money that a bank customer pays to a financial institution for the amount provided. The indicator is calculated as a certain percentage of the loan amount for a period of 12 months (for example, 15% per annum). Interest is paid in the currency of the loan. The size of the interest rate is affected by the term of the loan and the level of risk that the banking structure allows. The lowest interest rates can be obtained on loans with collateral.

What is loan refinancing?

Refinancing a loan is a new loan on more favorable terms, which is taken to pay off an old loan. Refinancing is often referred to as refinancing or a loan for a loan. Due to legal specifics, refinancing is classified as a loan with a specific purpose. The signed agreement must contain a wording about the need to send the money received to pay off debts in a commercial bank or other credit institution.

Purpose of the loan

The target orientation of the loan as a characteristic of the loan gives the bank client certain advantages. For example, obtaining a targeted loan is much easier. The requirements for borrowers who are allowed to spend on any needs are noticeably tougher. Interest on a target loan is always an order of magnitude lower. In the case of the purchase of real estate or a vehicle, the acquired property is used as collateral. For this reason, the risks of the bank are significantly reduced, and it is willing to ease the requirements.

Loan differentiation

Differentiation of credit is one of the features of modern work with the distribution of borrowed funds. The concept means the division of borrowers into certain categories depending on their level of solvency, which is confirmed in one way or another.

There are groups of borrowers whose solvency is called into question by lenders. Other categories, on the contrary, have an impeccable reputation and have repeatedly confirmed their reliability. To differentiate loans, a well-developed credit rating scheme with solvency criteria and other requirements for potential borrowers is used.

What does Wikipedia mean by the term - lending?

Lending is the issuance of a loan, which is a social relationship formed between the subjects of economic relations during the movement of value. Credit relations are expressed in such various forms of credit as commercial credit, bank credit, etc., leasing, loans, factoring, etc. Credit implies permission for one person to use the capital of another person.

Credit and lending Wikipedia describes how a special form of value relations that arise when the value that is released from one economic entity does not participate in a new reproduction cycle for some period of time. And it is the loan that contributes to its transition from an entity that does not use it (from the lender) to another entity that needs additional funds (to the borrower).

Credit or lending functions that Wikipedia describes

The functions of credit include: redistributive, creating credit instruments of circulation, reproductive and stimulating.

The redistributive function provides for the redistribution of value, which is temporarily released. Its implementation is possible at the level of enterprises, states, industries, as well as the world economy, it occurs on the terms of return of value.

The function of creating credit instruments of circulation is connected with the development of the banking system. Due to the fact that it becomes possible to store funds in bank accounts, non-cash payments are developing, mutual obligations are offset, then credit funds appear, not only in the form of circulation, but also as a payment.

The manifestation of the reproductive function of credit is carried out in two ways. Thanks to the receipt by the borrower of a loan, he acquires the opportunity to use the capital necessary for him for entrepreneurial activity (production) and the reproduction of an economic entity (commodity producer) is carried out. But the various enterprises for which lending, wikipedia describes that not only the best, but also the worst conditions for the production of goods for society (price, quality, cost) are realized.

The stimulating function of the loan can be observed in the acquisition of the possibility of developing production without own funds. It is thanks to the loan that such enterprises receive a sufficiently powerful impetus for their further development.

Forms of credit and lending as described by Wikipedia

Commodity, monetary and mixed forms of credit are distinguished.

In the commodity form of credit, a certain thing with specific characteristics is transferred for temporary use. This form existed even before the appearance of monetary relations, when goods, livestock, furs, grain, etc. were used as an equivalent in exchange, and subjects possessing surpluses of these goods acted as creditors. Similar property was subject to return with its increase indicated in advance. Modern conditions of the commodity form of credit can imply such as: delivery of goods with deferred payment, sale by installments, rent, leasing, commodity loan, etc. In some cases, the same or similar property is subject to return, both with an additional fee and without it.

In terms of money, Wikipedia means lending as a transfer for temporary use of a certain amount of money. In modern conditions of the economy, the monetary form is considered to be predominant and is actively used by the state, enterprises or individual citizens, and not only within the country, but also in external economic turnover. This form of loan involves the transfer of value for temporary use, subject to return after a specified period of time with interest.

The emergence of a mixed form of credit is possible in the case when the loan is provided in the form of goods and returned in the form of cash or vice versa: it is provided in money and returned as a commodity. The latter option is often used in international settlements, in which cash loans received are settled by deliveries in the form of goods. In the domestic economy, the sale of goods in installments involves the gradual return of credit in the form of money.

The uneven movement of working capital is caused by deviations of the actual need for working capital from their standard, which determines the minimum amount of the enterprise's own funds, which is necessary for its normal operation.

Credit (lat. loan debt) is a complex economic category. A credit transaction based on the temporary borrowing of someone else's property necessitates the material responsibility of its participants for the fulfillment of their obligations.

A prerequisite for the emergence of a loan is the coincidence of the economic interests of the lender and the borrower.

Credit is a relationship between a lender and a borrower regarding the return movement of value.

The lender is the subject of the credit relationship, representing the value for temporary use.

The borrower is the subject of the credit relationship receiving the loan.

The borrower can be a legal entity or an individual.

Just wanting to get a loan is not enough, so the borrower must provide an economic and legal guarantee to repay the loan at the end of the loan term.

Business entities within the framework of credit relations can change their economic role, i.e. change places.

Credit functions

• naturalistic concept
• Capital Creation Theory

The naturalistic concept interpreted credit as a way of redistributing commodity values. Its representatives believed that a loan cannot constitute capital, it only transfers it from the lender to the borrower.

Supporters of the capital-creating theory believe that credit not only transfers, but also creates credit capital, i.e. plays an important role in the economy.

In the domestic economy, these 2 approaches to the essence of credit are reflected in the redistributive and reproductive concept of credit.

Redistributive concept based on the consideration of the content of the loan, mainly as a process of redistribution of temporarily free funds, i.e. supporters of this theory define credit as a redistributive category relating to one phase of reproduction, and not to the entire reproductive process.

The reproduction concept proceeds from the connection of credit with the reproduction process as a whole, i.e. considers the loan as a reproductive category, which consists of the placement of funds with a preliminary accumulation of temporarily free funds.

The function reflects only certain features and represents its own specific appearance of the essence of credit as a holistic phenomenon.

Generally recognized are 2 functions of credit:

• redistributive
• The Function of Substituting Cash for Credit Transactions

The purpose of the first function is that through a loan, at the expense of temporarily free resources of some legal entities and individuals, temporary needs for funds of other legal entities and individuals are satisfied (the redistributive entity comes to the borrower for use only for a certain period). A characteristic feature of the redistributive function of a loan is that it redistributes not only cash, but commodity resources (commercial leasing credit).

The second function is related to the specifics of the modern organization of money circulation and its functioning, mainly in non-cash form. By placing and keeping money in the bank, the client enters into a credit relationship. Credit creates the conditions for replacing cash in circulation with credit operations in the form of bank account entries. Depending on what is ahead in time (receipt of goods of money), either the supplier credits the recipient, or vice versa.

The economic literature substantiates the legitimacy of such credit functions:

• Accumulation of temporarily free funds
• Distribution of accumulated funds between industries, enterprises and population
• Regulation of money turnover by replacing real money with credit operations
• Distribution cost savings
• Mediation of revolving funds
• Emission function
• Control (stimulating)

Limits and the role of credit. Lending principles

Like any economic phenomenon, credit has boundaries within which its essence is realized. In relation to economic categories, the border is considered as the limit of the distribution of those other economic relations. The boundary of the loan is the limit of relations regarding the return movement of value (within these boundaries, the loan retains its essential features).

The development of credit relations beyond economic boundaries leads to their rebirth and distortion of the essence of credit. The external boundaries of credit relations are their qualitative isolation in time and space from all other relations.

They contain the entire set of credit relations, show the objective limits of their functioning, the place of the creditor in the economic relations of society.

The internal boundaries show the allowable measure of the development of individual forms of credit (banking, commercial, state, consumer) within the external border of credit relations, i.e. shows the relationship of parts within a single whole.

Creditworthiness is an economically justified credit intensity of an economic link.

The volumes of credit investments for various firms have an economic limit, which is based on such a principle of lending as repayment. Hence, the properties of the loan imply the need for a mandatory return of the loaned funds, tk. The borrower's creditworthiness is limited by his ability to repay the loan.

Due to the fact that the main banking resources are borrowed funds, the issuance of the latter on credit is objectively limited, because. the bank must return these funds to customers within the agreed time frame. Therefore, the volume and structure of a bank loan, i.e. the limits of lending at the bank level are determined by its ability to ensure the repayment of its obligations in a timely manner.

Criteria for the visibility of bank loans (CB) and their quantitative characteristics are established by the Central Bank in the form of economic standards, because. violation of credit limits negatively affects the stability of money circulation and can have various consequences.

The concept of the role of economic categories is characterized by the specific manifestation of their functions in given socio-economic conditions. The role of credit expresses the result of the functioning of credit relations and is determined by the essence of the latter, i.e. is of an objective nature.

• The regulatory role of credit, which manifests itself in maintaining the optimization of the proportions of social reproduction.
• Credit is called upon to play an important role in providing scientific and technical progress (raising the technical and technological level of the reproduction process).
• One of the aspects of the impact of credit on economic processes is its role in saving distribution costs, in the process of performing the function of replacing cash with credit operations.
• The role of credit in the social sphere is significant, increasing the efficiency of social production, loans more fully satisfy the needs of society (growing credit contributes to improving the state of the consumer market in accordance with the priorities of social policy (production of consumer goods).

There are the following lending principles:

the principle of urgency, payment and repayment means that the loans provided to the borrower must be paid and repaid within the period specified in the loan agreement.

1. the target nature of loans means that its purpose is determined, first of all, by the borrower himself, however, when allocating a loan, the bank also proceeds from its purpose, from a specific lending object, because without observing this principle, it is difficult to ensure the repayment of the loan within the terms established by the agreement.

2. The principle of material security means that the borrower is obliged to perform those activities that provide a direct link between the issuance of a loan and its security.

Forms of credit and their definition

The form of credit characterizes the external manifestation and organization of credit relations. Changing their content leads to a change and the creation of new forms of credit.

Signs by which the forms of credit are determined:

• the nature of credit relations (permanent, one-time, episodic)
• characteristics of the composition of participants (subjects) of the credit transaction
• content of the object of the transaction
• level and source of payment of interest on a loan
• material manifestations of a credit transaction (secured loans, leasing, pawnshop).

Bank loan

Bank credit - the movement of loan capital provided by banks on loan, for a fee on the terms of security, repayment and urgency.

A bank loan expresses economic relations between lenders and lending entities - borrowers, which can be legal entities and individuals.

A bank loan is associated with the accumulation of temporarily free funds, their redistribution on the terms of repayment, as well as with the issue of banknotes into circulation through the lending system.

A bank loan is the main form of credit. It is provided mainly by commercial banks for the following tasks:

• increase in fixed and working capital
• accumulation of seasonal stocks of goods and materials, WIP and GP
• when discounting bills
• satisfaction of consumer needs of citizens
• redemption of state property
• for other purposes in case of mismatch of receipts and non-payments in the circulation of own capital.

• economy
• complexity
• differentiation.

Profitability characterizes the achievement of the greatest efficiency in the use of loans with the least credit investments. Complexity presupposes such a policy, as is done on the basis of taking into account the patterns of economic development in a certain period.

Differentiation is a different approach to lending to certain categories of borrowers.

State loan

It reflects credit relations regarding the accumulation of public funds on a repayment basis to finance public expenditures, where individuals and legal entities act as creditors, and the state represented by the Ministry of Finance of local authorities acts as a borrower.

This form of credit allows the borrower (state) to mobilize financial resources to cover the deficit without issuing paper money.

State credit is used as one of the measures to stabilize monetary relations, because. during the period of inflation, government loans from the population reduce its effective demand, withdrawing excess money supply from circulation, i.e. there is a diversion of funds from the cash flow for a predetermined period.

A bond is a security that certifies the deposit of funds by its owner and confirms the obligations of the legal entity that issued it to reimburse him the face value of this security within the period specified in it with the payment of a fixed percentage.

Treasury bills - government bills - a type of securities certifying the contribution of their holders of funds to the budget and giving the right to receive a fixed income during the period of ownership are placed on a voluntary basis among legal entities and individuals.

When acquiring securities, creditors confirm the following risks with varying degrees of exposure:

• credit
• market
• percentage.

Credit risk is inherent in securities and relates to the possibility that an issuer's financial capacity is reduced such that it is unable to meet its financial obligations.

Interest rate risk is the risk of changes in interest rates and the associated risk of a decline in the market price. The reason for the interest rate risk is the fixing of interest on bonds in an agreed manner at the time of their issue and the relative freedom of fluctuations in market rates.

Market risk - comes from the fact that due to unforeseen changes in the securities market (the economy of the country as a whole), the attractiveness of government securities as an investment object may be partly lost, so that their sale will become possible only at a discount to a certain extent in a forced okay. Typical for the internal state credit of Ukraine is such a form as NBU lending to the state budget. The repayment of contractual obligations issued by the government and stored by the NBU is subsequently carried out at the expense of the NBU's profit.

commercial loan

A commercial loan is a credit transaction between two firms (a seller-lender and a buyer-borrower).

The supplier company provides a deferred payment for its goods, and the buyer company transfers the promissory note to the creditor as a debt certificate and payment obligation. The specific term of a commercial loan depends on the type of product, the cost of the loan, the financial condition of the buyer and supplier, the value of the transaction, the existence of long-term relationships between them, the level of competition, the quality of the goods, etc.

Advantages:

• efficiency
• technical ease of design
• the mechanism of mobilization of free commodity resources and their distribution is activated.
• expanding the ability of enterprises to maneuver working capital
• providing financial support to each other
• contributes to the development of the loan market.

Flaws:

• limited in time and size
• risk for the supplier
• strong influence of the banking sector in the accounting of bills.

consumer credit

Consumer credit - reflects the relationship between the lender and the borrower regarding end-use lending, i.e. it is a means of satisfying the consumer needs of the population and hastening the receipt of certain benefits that they could have only in the future, provided they accumulate sufficient funds.

The issuance of a consumer loan to the population, on the one hand, increases the current effective demand, raises the standard of living, and on the other hand, accelerates the sale of inventories and services, and contributes to the creation of fixed assets.

In the process of repaying a consumer loan, consumer demand decreases by the corresponding amount, which must be taken into account when determining the volume and structure of trade, the dynamics of income and expenditure of the population, and the money supply in circulation.

Consumer credit includes a loan from pawnshops, which provides an opportunity for the population to pledge items for personal use and household consumption. The amount of the loan is limited and determined by the agreement, depending on the amount and type of things.

If the loan is not repaid within the agreed time in case of evasion of payment by the person after the expiration of the pledge period, the pawnshop transfers the property for sale. From the proceeds, the storage fee, the amount of the loan with interest on it, insurance costs are repaid, and the pawnshop returns the rest of the amount to the owner.

Leasing loan

A leasing loan is a relationship between legally independent persons regarding the leasing of labor tools, as well as financing the acquisition of movable and immovable property for a certain period, i.e. it is a form of property loan i.e. commodity).

According to the terms of operation and the period of depreciation of property, leasing is divided into:

• Operational
• Financial

Operational - assignment of property for a period less than the depreciation period. Financial - for the period of full depreciation (more losses for the lender and softer conditions for the consumer). In relation to leased property, a distinction is made between pure leasing, when the additional costs for the maintenance of the leased object are borne by the tenant (user).

Full leasing, when the maintenance of the object is carried out by the lessor (elements of corporate service).

Relations regarding leasing between its subjects are determined by the leasing agreement, which reflects:

• Subject Rights Limits
• Terms and frequency of payment
• User liability for failure to comply with contractual obligations
• Assignment of leasing rights

For the use of the object of leasing, the lessor collects a leasing payment, which must cover the costs associated with the acquisition of the object of leasing, the leasing rate, the costs of insuring the object.

Specialized leasing companies, in addition to all types of leasing, provide intermediary, technical, representation, information, advertising, consulting and other commercial operations.

Mortgage (collateral) loan

A mortgage loan is a special type of economic relations regarding the provision of loans secured by movable and immovable property.

Borrowers are natural legal entities that own mortgage objects (private houses, apartments, industrial buildings and structures, shops, warehouses).

When the ratio of the pledge agreement, it is necessary to establish in advance whether the given object of pledge was the object of pledge earlier in another place.

Bank lending resources are own savings, mortgage bonds and borrowed funds. Mortgage bonds are long-term securities issued by banks secured by real estate and generating solid income (industrial, residential buildings, land plots).

Basic documents for applying for a mortgage loan:

• Mortgages
• Bills
• Other securities that may trade on the secondary securities market.

A mortgage is a document that transfers legal ownership of the collateral for a loan to a lender, i.e. it is the basis of security and credit.

Real estate loans are subject to repayment on a deferred payment basis and with the payment of interest differentiated by banks. Mortgage credit presupposes the existence of private property and, above all, land.

International credit

International credit - is a temporary transfer of goods of the monetary resources of some countries for their use by other countries in order to accelerate their socio-economic development.

The need to use this loan is determined by the following conditions:

• Development of foreign economic relations between states and firms
• The need to provide credit assistance to individual countries.

The subjects of credit relations are states, banks and individual legal entities.

International credit can be used to balance payments between different countries, expand trade, strengthen economic and political ties with other countries.

The procedure for granting an international loan:

• The loan amount is fully credited to a separate account in favor of the borrower's country
• The credit account reflects the amount of commodity deliveries
• Deliveries under the loan are made according to the turnover through the clearing account
• Under certain conditions, with an international loan, the lender requires leasing.

When repaying a loan and paying interest on it, settlements, as a rule, are made with foreign exchange earnings from an increase in exports of goods, deliveries of goods from the borrowing country, products of firms for the construction of which a loan was issued (other conditions may be stipulated in loan agreements).

tax credit

Tax credit - is a deferment by tax inspectorates of tax payments for taxpayers for a certain period, if the latter has provided objective justifications and economic calculations for granting him a deferral of payments (natural disasters, expected highly effective results).

Based on the materials of the book "Money. Credit. Banks: Textbook for universities / E.F. Zhukov, L.M. Maksimova, A.V. Pechnikov and others; Edited by Prof. E.F. Zhukov" - M .: Banks and exchanges, UNITI, 1999. - 622 p.

Debit and credit - let's deal with these terms.

Many have nothing to do with accounting and economics, but they use the basic concepts and terms of accounting in their vocabulary every day. But quite often this terminology is used in various meanings that are far from the truth, and sometimes even distort its essence.

Consider the concepts of credit and debit - how they are similar and how they differ.

Each owner of a bank card necessarily faces the definitions of credit and debit. Therefore, professionals advise to seriously deal with these terms.

In simple terms, in accounting, a debit means replenishing an organization’s account, i.e. cash inflow to her account.

Translated from Latin, it is interpreted as "he must."

For a more accessible explanation, as an example, you can analyze the family budget of a family. The head of the family carries out activities, works, bringing income to the house, which is calculated by the hostess (accountant). This money income of the family is the same debit. Thus, it shows how much material wealth came to the family's account. The essence of the very understanding of the term "debit" helps to understand the meaning of the accounting operations themselves.

The very understanding of the word “credit” for many of us comes down to such a concept as obtaining a loan from a banking organization, and in Latin it means “I must”. And if we consider the definition of "credit" in the accounting sense, then it has something else.

If, again, we take it as an example, it turns out that a loan is the amount that we withdraw from the family budget.

In accounting reports, under the value of credit, they indicate the expenditure of finance from the organization's balance sheet.

As for the organization, its activities should be clearly recorded in accounting documents. This is especially true for fixing receipts of expenditures of cash and material assets. This article includes such operations as the purchase or lease of fixed assets, mutual settlements with various suppliers and contractors, write-off of balances, etc.

Not so simple

The opinion will be erroneous if we think that a loan is always an expense, and a debit is an income.

In accounting practice, there is a double entry that displays the movement of funds in two accounts at once.

In total, there are 99 accounts, which are divided into passive and active. Each division for debit and credit has its own semantic meaning, but, in general, these values ​​really reflect the movement of the organization's material assets.

Accounting accounts are divided into two types - active and passive.

Active ones are designed to account for fixed assets, display data on the profit of funds, availability and write-off. There are such types of active accounts as: for accounting for monetary, property and other assets. The debit of the active account shows the profit of the cash register, materials, receivables to the enterprise. The loan records the expenditure of assets, the decrease in material resources.

The debit card is for savings and the credit to this account will reflect an increase in your own funds. A credit card will display the amount not of personal funds, but of borrowed funds, i.e. those that need to be returned, an increase in this amount will mean an increase in personal expenses.

The task of passive accounts is to record sources for the organization's funds, as well as liabilities, debts to employees and other organizations.

To display a double entry for accounting accounts, there are tables in which the debit value is recorded in the left column, and the credit value in the right column.

The debit column keeps track of expenses, which include a decrease in capital, the payment of wages, and the payment of taxes. In the column for the loan, income is recorded: the amount of profit, the receipt of funds, the repayment of debt.

Debit - income, credit - expense

The entire financial system is built on the terms debit and credit. Both debit and credit denote the amount of money and material values, but their meanings are generally opposite to each other.

It will be easy for an ordinary person who is far from accounting to understand what is the difference between them using the example of bank accounts.

A debit account is an account that is designed to hold personal funds and the receipts to this account will reflect an increase in the amount of own funds. The opposite will be a credit account, which will display the amount not of personal funds, but of borrowed funds, i.e. those that need to be returned, an increase in this amount will mean an increase in personal expenses.

If we compare the debit and credit accounts, then in any case, the debit will be reflected in the left column of the balance sheet, and the credit in the right. In an active account, debit fixes the increase, and credit - the expense of the enterprise; in a passive account, a debit shows a decrease in the amount of debt, and a credit shows an increase. In the asset balance, balances on debit accounts are displayed, in liabilities - balances on credit.

Summing up, we can say that debits are the funds that the company owns, and credits are the expenses and debts of the organization, those funds through which the organization owns assets.

The terms debit and credit must be clearly distinguished in order to avoid various kinds of financial troubles, to distinguish a debit card from a credit card, to understand and analyze information on your own bank accounts.