Your Roommate, a Marketing Major, Thinks That Debit Means Decrease

question 184

Essay

Your roommate, a marketing major, thinks that debit means decrease and credit means increase. And, that every account can be debited and credited and as result, every account can have both a debit and a credit balance. Explain to your roommate (1) the meaning of debit and credit; (2) which accounts can only be debited, which can only be credited, and which can be both debited and credited; and (3) which accounts normally have debit balances and which credit balances.

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Definitions:

Inventory Turnover

Inventory Turnover is a measure of how often a company sells and replaces its stock of goods within a certain period, indicating efficiency in managing inventory.

Cash Cycle

Cash Cycle, also known as the cash conversion cycle, measures the time it takes a company to convert resource inputs into cash flows.

Inventory Turnover

A metric that measures the efficiency of a company in managing its stock of goods through the calculation of the cost of goods sold divided by average inventory.

Accounts Receivable Period

The average number of days it takes for a company to collect payment from its credit sales.