Can anybody help?

System
System Posts: 100,534 🤖 Admin 🤖
edited June 18 in AAT student discussion
Hi i am just going through some practice papers as i am sitting my foundation exam in December. Just got to the trial balance & cannot remember what debits and credits are defined as.<BR><BR>Im i right in saying debits are assets & expenses<BR>and<BR>Credits are income and liabilities<BR><BR>Thanks<BR><BR>Philippa<BR>

Comments

  • System
    System Posts: 100,534 🤖 Admin 🤖
    Can anybody help?

    Hi Phillipa <BR><BR>I don't know what they are defined as but the way were taught was this, assets, income are a gain so are a debit and liabilities, expenses are a loss so are a credit. It was basic rule of thumb and does apply in most cases.<BR><BR>Hope this helps.<BR><BR>Marie
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Can anybody help?

    An easy way to get your debits and credits right is to remember the word "PEARLS" <BR><BR>P - Purchases<BR>E - Expenses<BR>A - Assets<BR><BR>Are all debits on the trial balance<BR><BR><BR>R - Revenue<BR>L - Liabilities<BR>S - Sales<BR><BR>Are all credits on the trial balance<BR><BR>Hope this helps<BR><BR>
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Can anybody help?

    Marie,<BR><BR>I think you may have got the treatment of income and expenses confused.<BR><BR>Income would appear in the trial balance as a credit entry, as any income received would be recorded in the bank account as a debit.<BR><BR>Likewise expenses would appear in the trial balance as a debit entry, as any expenditure from the bank account would be recorded as a credit.<BR><BR>Is it possible that the rule of thumb you quoted was with reference to the treatment of entries into and out of the bank account rather than the trial balance?<BR><BR>Regards<BR>
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Can anybody help?

    Has anyone ever been taught DEAD and CLIC?<BR><BR>Debits<BR><BR>Expenses<BR><BR>Assets<BR><BR>Drawings<BR><BR><BR><BR>Credit<BR><BR>Liabilities<BR><BR>Income<BR><BR>Capital
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Can anybody help?

    Thanks everybody<BR><BR>Philippa x<BR><BR>
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Can anybody help?

    PEARLS - this is excellent - PEA all debits - purchases, expenses and assets so yes you were right then RLS are credits - revenues, liabilities and sales. This is a basic way of sussing it out but if you cannot do this then you are not ready and need to do some more double entry, there is never a short cut to understanding what is in the trial balance, how it got there, and what it means, really go back over everything as this is Unit 3 and if you mess this up you have a harder chance of getting onto Unit 5.

Categories

Privacy Policy