Explain Debits and Credits and Their Role in the Accounting

question 98

Essay

Explain debits and credits and their role in the accounting system of a business.

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Definitions:

Holdback Money

Funds retained by one party in a transaction as security or leverage until certain conditions are met.

Tax Liabilities

Financial obligations imposed by governments that are required to be paid, such as income tax, corporate tax, and sales tax.

Escrow Account

A financial arrangement where a third party holds and regulates payment of the funds required for two parties involved in a given transaction.

Purchase Price

The cost at which a product or service is bought, excluding additional expenses like shipping or taxes.