AARGHH! Credits and Debits... please help!

System

I started on AAT Fast track intermediate level in Sept which is a year course. Our first exam is in December. I have never taken any finance courses before, and do not work in an accounts situation. I seem to be holding my own in most areas as far as past test papers go however I cannot get my head around which column monies go in for Credit and Debits! (Not really good when you are hoping to work in a Finance career :oops: )

On all December past papers there seems to be a question on recording stock levels, either FIFO or LIFO followed by the credit/debit coding section -

e.g 1000 Stocks
2000 Work in Progress
3000 Creditor Control
I do know that Credit "go out" and Debits "come in" but when I enter my answers they are incorrect. I "guessed" correctly that the Issues of stock are going out however monies will be coming in and therefore Dr. What confuses me is with Receipt of good. These stocks are coming in, but the money for them should be going out, but this is still shown as a Debit (Dr).

Can someone please help me as all my class are with the programme and I'd like to know how that feels!

Thanks :roll:

System

Re:AARGHH! Credits and Debits... please help!

The stock related double entry can be confusing. Start from first principles: DEADCLIC

Debit: Debtors, Expenses, Assets, Drawings
Credit: Creditors, Liabilities, Income, Capital

Also whenever one amount is debited, an equal amount must be debited elsewhere. If you are spending money, the money out is a credit, but what you are spending it on is an equal debit. Like Newton's third law of motion (for every action there is an equal and opposite reaction), but Luca Pacioli's Summa was written nearly two hundres years before Isaac Newton's Principia

Think about how you might define asset and liability:
Asset: Something a business owns, or is owed.
Liability: Something a business owes.

Consider this example:
A business starts with the following balances:
Creditors: £1,500
Stock (raw materials): £2,000
Work-in-Progess: £0

This means that it owes £1500 to its creditors (a liability), and has £2000 worth of raw materials (an asset)

The way the question is normally worded, the first thing you do is to buy raw materials: This increases the asset Raw Materials Stock and increases the liability Creditors. You increase an asset account by debiting it, and increase a credit account by crediting it.

Dr Stock (Raw Materials)
Cr Creditors

Then, materials are issued to production. This decreases your asset of Stock (raw materials) and increases your asset of Work in Progress. To decrease Stock, we credit the account:

Dr Work in Progress
Cr Stock

Hope this helps