debits & credits

loadabollocks

i have no accountacny background but i have joined a firm as a trainee. I have been thrown completely in the deep end having to prepare accounts etc and i have no clue what i am doing.
'debits and credits' is what i keep hearing i need to get to grips with. Can anybody point me in the direction of a quick way to learn these? any books or knowledge you would like to share? i got a book myself called 'basic accounting' but its pretty crap, laid out kinda badly.
anyway any help much appreciated.

kluivert

Debit - DRive on the left
Credit - CRash on the right

Step one: draw a T account.
Step two: left side put DR
Step three: right side put CR

Debit = monies coming in (receivable)
Credit = monies going out (payable)

Ask yourself the question. Is the money or transaction coming into the T account (Control Account) or going out, is always your first step.

For every debit you must have a credit, there is no ifs or buts about this ok.
In other words all assets should equal liabilties ok.

Quick example: Sales.

You raise an invoice for 121e incl vat @ 21%

Your entries are:

DB: Trade Debtors (Amounts Receivable)(Balance Sheet) 121
CR: Sales (P & L) 100
CR: Vat Control Account (Balance Sheet) 21

When you receive the payment of 121e from the customer, your entry will be:

DB: Bank Account (Monies coming in) (Balance Sheet) 121
CR: Trade Debtors. (Balance Sheet) 121

This will cancell the Debtor Account of 121 to 0, so you know that noone owes you money.

If you try and get a first year accounting book from DKIT, there is work examples in it that will build up your accounting knowledge from scratch, its what I used, it teaches you how to do T accounts to a complete set of accounts over 20+ chapters, step by step.

Do not hestiate to ask questions here as well.

mikeruurds

loadabollocks wrote:

i have no accountacny background but i have joined a firm as a trainee. I have been thrown completely in the deep end having to prepare accounts etc and i have no clue what i am doing.
'debits and credits' is what i keep hearing i need to get to grips with. Can anybody point me in the direction of a quick way to learn these? any books or knowledge you would like to share? i got a book myself called 'basic accounting' but its pretty crap, laid out kinda badly.
anyway any help much appreciated.

I have a good book that you can have if you care to meet up. I've been an accountant for 14 years so I no longer have a need for it

loadabollocks

thanks lads youve been very helpful.

mikeruuds i appreciate the offer but i got one from my uncle who is an accountant and who also said he would help me with any problems. He's not always around though so you may see me posting here again .

anyway thanks again lads.

chump

what if you receive revenue - but you have a deferred revenue account, and a long term deferred revenue account

You receive 100k in revenue and book it as rev., you have to reverse out 50k of this into deferred revenue, this 50k is to be amortised out over 24 months.
Your company introduces a policy that says deferred revenue that wont be amortised out until a period >12 months must go into the long term deferred revenue account. What do your T-accounts look like then?

Revenue
________DR_________________CR__________
|
|
|
|

Deferred Rev
________DR_________________CR__________
|
|
|
|

Long Term Deferred Rev
________DR_________________CR__________
|
|
|
|

Kinetic^

Let's not try and confuse the OP now chump. Once he's got the basics then he can move onto the hardcore stuff.

loadabollocks

ah here....gotta crawl before i climb hehe

made me chuckle though

kluivert

chump wrote:

what if you receive revenue - but you have a deferred revenue account, and a long term deferred revenue account

You receive 100k in revenue and book it as rev., you have to reverse out 50k of this into deferred revenue, this 50k is to be amortised out over 24 months.
Your company introduces a policy that says deferred revenue that wont be amortised out until a period >12 months must go into the long term deferred revenue account. What do your T-accounts look like then?

Revenue
________DR_________________CR__________
50 |100
bal 50 |
|
100 | 100

Deferred Rev
________DR_________________CR__________
25 |50
bal 25 |
|
50 | 50

Long Term Deferred Rev
________DR_________________CR__________
|25
bal 25 |
|
25 |25

I have edited your quote.

You just split the amount between amounts due within 1 year, and amounts due greater than one year, the same principle as with a long term loan.

Kinetic^

kluivert wrote:

the same principle as with a long term loan.

And grants

chump

kluivert wrote:

Debit - DRive on the left
Credit - CRash on the right

Step one: draw a T account.
Step two: left side put DR
Step three: right side put CR

Debit = monies coming in (receivable)
Credit = monies going out (payable)

Ask yourself the question. Is the money or transaction coming into the T account (Control Account) or going out, is always your first step.

hey the reason I posted here was because I'm not sure I agree with the above.

For example look at the long term deferred revenue account - how confusing is it going to be to a random punter when we have written the above?

All I look at is the Bank account. Money in is a debit, money out a credit - you can work back every single 'transaction' to that account - so if you ever get confused about whether some account is an expense, an asset, a liability account you just work it back down to the bank.

Newaglish

Debit assets and expenses!

Credit liabilities and gains!

That is the extent of my contribution :P

LoneGunM@n

Newaglish wrote:

Debit assets and expenses!

Credit liabilities and gains!

That is the extent of my contribution :P

That's how I was trained ... your best bet is to get a leaving cert accountancy book for the basics!

Leon11

Cr The Giver
Dr The Receiver

it's gotten me through so far

kluivert

Newaglish wrote:

Debit assets and expenses!

Credit liabilities and gains!

That is the extent of my contribution :P

Sorry I have to:

Credit is liabilties and revenue.

Gains is a balance which comes from credits less debits.

Sorry again.