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Help, i need a hero.
I've only recently started studying and I'm loosing faith as i seem to be stuck on the whole concept of double entry, and entering things into this system!!
I feel I'm over thinking it and it's not as hard as i am making out but i need some pointers/websites or explanations, in simpleton terms that will help.
Is there anyone out there who can give me some guidance, I'm sure once I've managed one or two I'll pick it up and will Rule at this badboy! It's just that getting started battle!!
Tar muchly!
Lis
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Hiya,
I know its confusing at first, especially getting your head round putting money in the bank is a debit and taking it out is a credit. What I found helpful was something I read in a book, it suggested getting your head around that, and thinking round the effect that the double entry would have on the bank/cash account.
So..pay rent..that will credit the bank account so the corresponding double entry will be to debit the rent account.
cash sales will debit the bank account so credit sales.
Sales to credit customers..credit sales and debit the sales ledger control account. When the customer settles their bill, you would credit the sales ledger control account to "close" it and debit the bank account. So it is the same as a cash sale but with a extra step.
Hope that makes sense, and hasn't totally jumbled your head, I can picture it in my head, but harder to write it down.
Allison
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Hi Loopylis,
The subsidry ledgers are just memorandum as are sales and purchase day books and these are not to be counted in the double entry. The double entry is only counted in the nominal or general ledgers.
The subsidury ledgers are the 'named' sales and purchase ledgers with customers and supplier names on them and the day books are only memorandum.
so say if an owner of a business invests caital of 60 into his business bank account the double entry will be dr bank cr capital.
If an owner of a business sells goods to value of 200 on credit to Lite Ltd the double entry will be sales cr 200 and debtors dr 200. You will also have to record this in the subsidury accounts as follows; dr Lite Ltd, and also in the Sales day book.
Hope that ythis helps
Kind Regards
Paula Welsh
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Hey there, I am in about the same place in the course as you..... see my post about learning which book is for what.
I worked out a little thing to help me with the debit/credit thing.... "when you go shopping you take your credit card" from here you can work everything out.
As for the double entry.. the way I see it is, the book that you put the gross amount in is to help you pay or collect the right money to/from the right people. The other side of the entry is for the analysis side of things.
So, you buy some stuff. You need to record against the supplier how much you owe them, this goes in your purchase ledger. But, it is also handy to know what you bought, whether it was expenses or stuff you are going to sell. You also need to know how much VAT you have paid. So the General Ledger and the VAT ledger allows you to split the invoice down into it's component parts. The sum of the G/L entry and the VAT should then equal what you have put in the purchase ledger.
When you enter a payment into the Purcahse Ledger you to know how much you have paid a supplier by and how much you still owe by reducing the total in the purchase ledger. Entering the double entry into the cash book allows you to keep a running tally of how much money you actually have.
That's the basics but hopefully it will help.
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Hiya LoopyLis,
Firstly, welcome to the forum. We have all been in your position Lis, finding double entry bookkeeping daunting and somewhat frustrating. The secret is to persevere and all will become apparent. Once you have mastered the basics of this badboy there will no stopping you. I would highly recommend Frank Wood’s Business Accounting 1 as additional reading material (I’m assuming you’re studying with a course provider). Also, Allison’s tip on relating the effect that transactions have on the cash account has always worked for me, i.e. For money received - Debit Cash Account, for money spent - Credit Cash Account, e.g. If you purchase stationery for £20 cash, you would Credit Cash Account £20 (money spent) and therefore Debit Stationery Account £20...double entry complete. If you receive £100 cash from a customer, you would Debit Cash Account £100 (money received) and therefore Credit Customer Account £100...double entry complete. Anyway, hope I haven’t sent you over the edge with this and happy studying (get that faith back).
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This question came up recently too. If you have got to grips with assets and liabilities then this could help.
DR Increases an Asset
CR Decreases an Asset
CR Increases a Liability
DR Decreases a Liability
When it comes to laying out your T accounts just remember:
You DRive on the left and CRash on the right.
Good luck.
Kris
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kjmccullochsaid:
“This question came up recently too.
Indeed it did.
Just remember CR Creditors and you can work a few entries out from that string;
When you buy something on CRedit, you would CR CReditors - so the double entry will be DR and as you are buying something, will be DR Purchases or the General ledger account e.g. stationery.
So the opposite of this, when you sell something, you DR DebtoRs - so the double entry will be a CR and as you are selling something, will be CR Sales.
Regards,
Kerry
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And to quote Geoff from the previous post;
"Although I haven't used it yet there are some who like DEADCLIC
debit
Debtors
Expenses
Assets
Drawings
credit
Creditors
Liabilities
Income
Capital "
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Hi Lis
This may be far too simplistic but, when I was getting to grips with double entry, the best way I remembered which side entries were to be posted to was:
Left-In (Debit); Out-Right (Credit)
Anything IN the company is an Asset (Debit) and anything the company owes goes OUT (Credit).
Hope this helps and apologies if way too basic!
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James @ ICBsaid:
Not heard that before, made me laugh!”
Same here. The one i use is "drink to much ale and you'll get a clip round the ear"
Dr entries being increases in
Assets
Losses
Expenses
Cr entries being increases in
Capital
Liabililities
Income
Profits
Bank statements are confusing until you realise, they're are written from the banks perspective. Paying into your account is a Cr because it's an increase in the banks' liability to pay you the money bank.
Edited at 08 Nov 2011 05:40 PM GMT
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