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matthew keating

Hi People


Is there and easy way to remember what goes on what side of the SOPL & SOFP????

Trying to get my head around this.. Ahhhhhhhhh

Cheers

sdv

matthew keating wrote: »

Hi People


Is there and easy way to remember what goes on what side of the SOPL & SOFP????

Trying to get my head around this.. Ahhhhhhhhh

Cheers

look at the account name ask yourself these 4 questions?

1 is the account and income a/c?
2 id the account an expense a/c?
3 is the account an asset a/c?
4 is the account a liability a/c?

If your answer is an income or expense a/c - it should go to P&L
and asset and Liability a/cs to BS

exception - Drawings a/c (this is a capital a/c) therefore should go to BS

matthew keating

thanks that a great explanation just one more thing, what side of P&L and BS

CeeJaySix

P&L - expense or a loss is a debit (purchases, overheads, depreciation charge); income or gain is a credit (eg. sales, profit on disposal of fixed assets).
BS - assets and anything owed to you is a debit (fixed assets, cash at bank, trade debtors); liabilities and anything owed by you is a credit (depreciation, loans, trade creditors, capital (the business owes the shareholders the face value of their shares)).

Some things can go either side depending on which way money is owed - for example the VAT account may be in debit or credit depending on whether VAT is owed to the business or to HMRC.
The profit and loss reserve often catches people out - if the business has retained profits, the a/c is in credit. This may seem counter-intuitive, but those profits effectively are owed to the shareholders; the fact that the business currently has the benefit of them is reflected by the debit balances in cash and other assets. If the business has retained losses, the reserve will have a debit balance.