in this section we will cover an introduction to the history of debits and credits the need
for financial recording system lucia Pacioli the father of accounting the confusion about the terms
debit and credit a definition of the terms debit and credit and then a brief summary debits and
credits is a key component of a financial record system known as double entry bookkeeping this
system was first used by the Venetian merchants of Italy in the 15th century Renaissance period
it was documented in Latin in 1494 and then translated into English in the sixteenth
century with the passage of over 500 years is it any wonder that we have become a little confused
about the original meaning of these accounting concepts complicating it further is the fact
that the English language has evolved giving new meanings to these age-old words and concepts so
as we try to understand the concept of debit and credit it may be beneficial for us to go back to
where it all began to see if we can understand what the Venetian saw when they used the terms
debit and credits in the double-entry bookkeeping system in more primitive times there was little
need to record financial transactions because the person who made the goods was usually the person
who sold the goods in the marketplace however in the fifteenth century Renaissance period there was
a huge increase in interstate trade brought about by the Roman built transport systems
and the growth of more sophisticated societies like those in Venice Italy at that time Venetian
entrepreneurs were creating enterprises in an effort to satisfy the increased desire for goods
required of their society so they began trading with one another with other cities and with other
states this new trading in goods between different entities created quite complex financial dealings
because it involved many financial transactions between many different stakeholders the rise of
banks and investors who funded these enterprises further complicated the process and increased
the need for objective financial status reports to deal with this new complexity the merchants
of Venice developed the double-entry bookkeeping system to accurately record financial transactions
so that they could monitor the monies owed the assets owned and the profitability of their
enterprises a Franciscan friar and mathematician from that era Lucia Pacioli was the first to
document and published this system in a book his book was first published on the Gutenberg press
in 1494 and was the only accounting textbook for over a hundred years Lucia is acknowledged today
as the father of accounting Lucia is book outline the entire double-entry bookkeeping system and it
included a section on debits and credits now while the system was developed over 500 years ago its
principles and process are still followed today by accountants and bookkeepers the world over when
Lucia first recorded the double entry bookkeeping system in 1494 he did so in Latin which was the
language at the time so Lucia used the Latin terms credit air and debit air to describe what he saw
as the dual impact that financial transactions have on the accounts of a business by looking at
the meanings of the Latin words credit and debit air we may get a clue as to why Lucia would have
chosen these terms in particular see creditor in Latin means to entrust something and debit
air means to Oh to someone so the Latin terms creditor would have been used at the time when
a bank loaned or entrusted money to a business and the Latin term debit air would have been used
to describe the fact that the business now owes money of equal value back to the bank in a sense
each of these terms describe a different side of the same transaction so it made sense then for
Lucia to adopt these terms in the double-entry bookkeeping system to describe the dual impact
that financial transactions have on the accounts of a business in the 1500s English translators
then translated these Latin terms as credit and debit respectively furthermore understanding
that the English word debit comes from the Latin word debit a helps explain why we use dr and CR
as abbreviations for debit and credit today see there's no R in the English word debit but there
is an R in the Latin term deputy so quite possibly today's convention of using dr as an abbreviation
for debit is simply a carryover from the time when the Latin term debitor was in use English
is an evolving language that has developed many different meanings over time for the terms debit
and credit other than the ones originally used for accounting during the 15th century in fact if you
look at most dictionaries you'll discover over 10 different meanings for the term credit including
the specific one that we use in accounting some students even try to relate the term debit with
debt yet these two terms have no relationship even though they have very similar sounding tones is it
any wonder then that the debit and credit concept is a difficult one for 21st century students
to understand as we begin to understand these concepts it is very important to realize that
debits and credits are terms that have unique and specific meaning for the double-entry bookkeeping
system so the terms debit and credit in accounting have no relationship with any other meaning of
these terms it is these various meanings and the attempt by students of accounting to form a
relationship between these meanings that causes the most confusion for example the term credit
today has many different meanings credit can mean to ascribe an achievement to someone or
the ability of a customer to obtain goods or services before payment or even to represent
money lent or made available under an arrangement or further the acknowledgment of a grade level in
an examination or finally a source of pride that reflects well on another personal organization the
accounting meaning of the term credit should not be confused with any of these meanings nor should
the term debit be likened with the concept of debt furthermore debit and credit has no relationship
with the concepts of good and bad nor positive or negative nor even increase and decrease so the
first step to making sense of the terms debit and credit is to understand that only their accounting
meaning has relevance to look keep the terms debit and credit I used in the double-entry bookkeeping
system as a method of classifying and recording financial transactions this method provides an
accurate way of recording the changing values in the financial accounts of a business caused
by these financial transactions the debit and credits classification method also identifies
the flow of economic value that takes place in every financial transaction where economic value
transfers from a source credit to a destination debit in summary then we should remember that
debits and credits were first used by the Venetian merchants of Italy in the 15th century they were
first documented in latin by lucia Pacioli in 1494 and we're later translated into english in
the sixteenth century we should remember that the debit and credit concept is a key part of
the double-entry bookkeeping system and that the double-entry bookkeeping system was created to
deal with the increased financial complexities involving many different stakeholders that
also included the recently emerging banks and investors we should also remember the English
term debit and credit are derived from the Latin terms credit and debit a which explains where we
get the abbreviation D are for debit the Venetian merchants use the terms credit and debit because
it reflected the common financial transaction that involves someone entrusting something creditor and
then someone Owings debited in the 500 GS the terms debit and credit were translated from
Latin English has added many different meanings to these terms it is vital to remember that the
terms debit and credit as used in accounting have no relationship with any other meaning and use of
these terms the terms debit and credit are used in the double-entry bookkeeping system as a method of
classifying and recording financial transactions the debit and credit classification method
describes and records the flow of economic value that takes place in every financial
transaction where economic value transfers from a source credit to a destination debit