For AAT student members
Foundation Certificate in accounting
So in a normal T account I’ve been taught that debit goes in and credit goes out. But when I’m researching the trial balance it is showing it as the exact opposite. Could someone please explain this to me? x
When you say that a debit goes in, I presume you mean that putting £2,000 in the bank looks like this:
So the Bank a/c now has a debit balance of £2,000
Unlike T-accounts, the trial balance does not show transactions, it just shows balances.
In the trial balance, the £2,000 debit against bank just tells us that the Bank a/c now has a debit balance of £2,000
I hope this is of some assistance
This might be a bit clearer:
Hi Katipie, " debit goes in and credit goes out " is half the truth . Please find below the full principle:
For Personal Accounts - Debit the Receiver, Credit the Giver
For Real Accounts - Debit goes in and credit goes out
For Nominal Accounts - Debit all expenses and losses, credit all income and gains
Let's Refer to the Trial Balance:
Item No 1 - Purchases : Its an expense , so Nominal Account . For Nominal Accounts, the rule is debit all expenses, hence purchases have debit balance.
Item No 2 - Sales : Its an income , so Nominal Account . For Nominal Accounts, the rule is credit all incomes, hence sales have credit balance.
& so on....
Hope this clarifies
When I was first learning bookkeeping I was told to remember 'DICO' ie: Debits In, Credits Out - what this means are that items coming in to the business are Debits (Expenses, Assets) whereas items going out are Credits (Sales, Liabilities, Capital). This is confirmed by the balances on your trial balance.
I've never though of it in terms of 'debit=in' and 'credit=out'. Simply for the reason that in a double entry system there are always 2 entries. Nothing can ever really 'go out' without going into somewhere else. It's closer to weighing scales in my mind.
I found that it's easier just to focus on where things need to be debited or credited. I used the PEARLS rule when I started but I hear that's outdated now. Apparently DEAD CLIC is the way forward if you want to understand the nature of debits and credits.
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