etb

jkc

i just cant get my head round can any one help!

Paul24

Which bits in particular are you struggling with, it covers many aspects.

jkc

the debits and credits in P&L and balance sheets
why is provision for depreciation a credit in the bal sheet?
things like that.

Paul24

P&L Debits - Expenses
P&L Credits - Income

Bal Sht debits - Assets
Bal Sht Credits - Liabilities

A provision is making an allowance in the accounts for not receiveing the bad debts in this case, and therefore is classified as a liability. Therefore a credit to increase this provision will result in a debit (as each credit has to have an opposite entry as does each debit) being taken to the P&L. If you think about it logically, the cost of the increased provision has to go to the P&L, as it represents money you are probably not going to receive, therefore it has to be reflected in the P&L effectively decreasing the profit figure.

jkc

hi
that makes it easier,
thankyou for your help.

Gem7321

Have you heard of PEARLS and DEADCLIC before?

Purchases, Expenses, Assets = debit
Revenue, Liabilities, Sales = credit

or

DEBIT
Expenses
Assets
Drawings
CREDIT
Liabilities
Income
Capital

Depreciation is normally classified as an expense, we know expenses are debits so debit P&L depn and credit BS. Or, depreciation decreases the value of an asset in the BS, we know assets are debits, so we must have to credit depreciation BS and debit depreciation P&L.

Hope this helps

Gem

jkc

hi
thanks Gem, that makes it a bit clearer.
good luck to all those doing unit 5 sims