Debits & credits

shelbyshelby Just JoinedPosts: 1Registered
I am midway through my foundation AAT course and I am still struggling with getting my debits and credits right with the sales and purchases. Does anyone have any advice??????

Comments

  • burgburg Experienced Mentor GloucesterPosts: 1,440Moderator, FMAAT, AAT Licensed Accountant
    I used to go with sales are always a credit
    so then you can work that expenses are a debit

    For the balance sheet:-

    An asset will be a debit (i.e. stock, fixed assets, debtors)

    A liability will be a credit (i.e. a loan, creditors)
    Regards,

    Burg
  • AdamRAdamR Experienced Mentor Posts: 668Registered
    My class was taught to remember DEAL and CLIP:

    Debits
    Expenses
    Assets
    Losses

    Credits
    Liabilities
    Income
    Profits

    There are others out there as well using the same sort of idea.
  • burgburg Experienced Mentor GloucesterPosts: 1,440Moderator, FMAAT, AAT Licensed Accountant
    AdamR wrote: »
    My class was taught to remember DEAL and CLIP:

    Debits
    Expenses
    Assets
    Losses

    Credits
    Liabilities
    Income
    Profits

    There are others out there as well using the same sort of idea.


    Never heard this but it looks a great way to remember.

    We have all been there Shelby you will get it it just needs practice, in a while you will look back and think 'I can't believe I had to think if it was a debit / credit'

    Best of luck with the studies
    Regards,

    Burg
  • Jon_1984Jon_1984 Well-Known Posts: 186Registered
    PEARLS

    Purchases
    Expenses
    Assets

    Revenue
    Liabilitys
    Sales
  • dawson001dawson001 Just Joined Posts: 1Registered
    I find this helpful....

    Debit the reciever
    Credit the giver
  • jow774jow774 Trusted Regular Posts: 465Registered
    Have you tried the Unit 5 and Book Keeping e-learning on AAT website? Its brill for helping debits and credits to sink in. Also gives you the DEAD CLIC rule.

    Debits
    Expenses
    Assets
    Drawings

    Credits
    Liabilities
    Income
    Capital
  • AK002AK002 Font Of All Knowledge Posts: 2,492Registered
    I tend to use the bank.

    If you get it into your head that an expense crs the bank and a sales receipt drs the bank then you can work from there..
  • A-VicA-Vic Expertise Guaranteed Posts: 6,970Registered
    PEA RLS

    Draw a t account with the above in the middle
  • AK002AK002 Font Of All Knowledge Posts: 2,492Registered
    Bah humbug it never worked!
  • steveJsteveJ Experienced Mentor Posts: 694Registered
    Someones already mentioned it but I would say

    Debit
    Expenses
    Assets
    Drawings

    Credit
    Liabilities
    Income
    Capital

    Just think of sales as outgoing (credit) and purchases as incoming (debit).

    Don't worry we've all been there. You will get the hang of it eventually. Just keep going and in the end you'll be on here helping other beginners.

    Good luck
  • taskeytaskey Font Of All Knowledge Posts: 1,800Registered
    when dealing with the bank - i say "in out shake it all about" and i remember that the bank is always the other way round to what you would expect. ie if you are paying an invoice it physically is a debit from the bank but on the books it is a credit, and if you are receiving money in the bank, it is physically a credit to the bank but on the books it is a debit.

    confusing yes, but once you get to grips with it, it flows.

    Tracy
  • speegsspeegs Experienced Mentor Posts: 854Registered
    Don't forget about DIALL CILLA

    Debits
    Increase
    Assets and
    Lessen
    Liabilities

    Credits
    Increase
    Liabilities and
    Lessen
    Assets

    Speegs
  • Raging PineapplesRaging Pineapples Well-Known Posts: 110Registered
    People often get confused with why a sale is on the credit side, because sales are a good thing, and people associate credits with liabilities (which are usually a bad thing).

    So why are Sales on the credit side?

    Well your Sales are gonna be your profit aren't they? And your profit will ultimately go to the owner of the business.

    So money from your Sales is owed to the business' owner. Purchases reduce that debt just like a credit note would reduce any other debt. It's just the same as accounting for VAT: you gradually build up a liability and you pay it at the end of the year.

    You can see the truth of this with what happens in the accounts at year end. Sales get netted off against purchases (just like Sales VAT and Purchase VAT) and the balance is paid as dividends to the owners (or in VAT, paid to The Revenue).

    Do you see how this works?

    Summary

    - Money from sales is owed by the business to its owner.
    - Sales are therefore a credit.
  • DiannewDiannew Font Of All Knowledge Posts: 2,814Registered
    People often get confused with why a sale is on the credit side, because sales are a good thing, and people associate credits with liabilities (which are usually a bad thing).

    So why are Sales on the credit side?

    Well your Sales are gonna be your profit aren't they? And your profit will ultimately go to the owner of the business.

    So money from your Sales is owed to the business' owner. Purchases reduce that debt just like a credit note would reduce any other debt. It's just the same as accounting for VAT: you gradually build up a liability and you pay it at the end of the year.

    You can see the truth of this with what happens in the accounts at year end. Sales get netted off against purchases (just like Sales VAT and Purchase VAT) and the balance is paid as dividends to the owners (or in VAT, paid to The Revenue).

    Do you see how this works?

    Summary

    - Money from sales is owed by the business to its owner.
    - Sales are therefore a credit.

    Well explained !!!
  • Raging PineapplesRaging Pineapples Well-Known Posts: 110Registered
    Thank my Dad for that one, lol. I always used to think "Sales are a Credit because money into Bank is a Debit so it's not physically possible for Sales to be anything else"... until my Dad (an accountant for 40 years) gave this elegant explanation that your sales are simply profit gross of expenses and so are basically capital.

    He can drone on for hours on pointless subjects but every now and then a gem slips out!! :D
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