Describe your knowledge of debit and credit entries.

Question

Accepted Answer

Understanding debit (DR) and credit (CR) entries is crucial for accurate financial record-keeping in accounts payable.

Debit (DR) increases asset or expense accounts; for example, when you receive an invoice, you debit the expense account.
Credit (CR) increases liability or revenue accounts; for instance, when you record a payment to a vendor, you credit the accounts payable.
In a typical accounts payable transaction, when an invoice is received, you debit the relevant expense account and credit accounts payable.
When payment is made, you debit accounts payable and credit cash or bank account, reflecting the reduction in liability.

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