Explain why the following are debits or credits?

Up until now I've linked everything back to the bank account which has made it pretty ease to figure out if something is a debit or a credit. However I'm now studying accounting for sales, returns and discounts and it says that a credit sale is recorded as a debit to the sales ledger control account but a credit to the sales account and the VAT account (as the image attached shows). Can someone explain why this is the case?

Comments

  • davealucas
    davealucas Registered Posts: 139 Dedicated contributor 🦉
    If this was a cash sale you would debit the cash book and credit the sales and VAT accounts. This transaction is similar but no cash transaction takes place. A sale on credit (the person who you sold to becomes a creditor) is recorded as a debit in the sales ledger and a credit to the sales and VAT account. All of the sales ledger transactions are then collectively moved to the sales ledger control account as a debit to record the asset.
  • Lewisham_lass
    Lewisham_lass Registered Posts: 52 Regular contributor ⭐
    edited June 2020
    Hi! Have you gone through DEAD CLIC?

    DEAD CLIC is a simple way to remember the which entries should be a debit and which should be a credit. Debit entries represent increases in Expenses, Assets and Drawings. Credit entries represent increases in Liabilities, Income and Capital.

    The receivables are seen as an asset (you will later get the cash in) so they are a Debit. The sales will always be a credit, as it is Income.

    Check this against the chart below.

    The items below debit and credit are debits or credits as shown below.

    DEBIT
    Expenses
    Assets
    Drawings

    CREDIT
    Liabilities
    Income
    Capital

    Hope this helps.
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