Just started first year accounting and i’m having some difficulty wrapping my mind around this (seemingly) contradictory idea.
If some one could attempt a simple explanation along with an example it would be great.
Thanks.
braces for countingbeans to appear and make tmay11 cry for failing to understand basic accounting concepts ROYDRAGE HRRRUUUUUGGGGHHHHH
Assets and expenses normally have debit balances.
Liabilities, equity and revenues normally have credit balances.
Every journal entry must balance - debits must equal credits. That sets up the most basic equation in accounting:
Assets = liabilities + Equity
So if you’re entering a simple journal entry - for example - selling a product.
You’re getting cash so you would DEBIT cash because it’s an asset (ie, increase cash).
You’re also recording revenue so you would CREDIT the revenue (ie, increase revenue) account.
Make sense?
But wait, aren’t you paying a university to teach this to you? Surely they should be able to help. 
I am 100% about this but if you are having difficulty understating such easy concepts don’t you think your calling/talent is something else? I am only saying this because back in college people who struggled with calculus classes usually did not do so well in advanced engineering classes.
I believe the same may apply with any other discipline unless you are actually an accounting major (which I thought you meant to say).
[quote]LankyMofo wrote:
Assets and expenses normally have debit balances.
Liabilities, equity and revenues normally have credit balances.
Every journal entry must balance - debits must equal credits. That sets up the most basic equation in accounting:
Assets = liabilities + Equity
So if you’re entering a simple journal entry - for example - selling a product.
You’re getting cash so you would DEBIT cash because it’s an asset (ie, increase cash).
You’re also recording revenue so you would CREDIT the revenue (ie, increase revenue) account.
Make sense?[/quote]
Yes, this makes sense. I can look at the equations and it makes sense. The confusion lies in using the same term to me opposite things. Why is a “debit” an increase in an asset or expense account and a “credit” a decrease.
Whereas in a liability or equity account a “debit” is a decrease and a “credit” and increase. Is this just the way the terms have been defined and it’s simply a matter of learning when a “debit” means increase and when it means decrease? Or is there some logic behind this that i’m missing?
Thanks.
[quote]JLu wrote:
braces for countingbeans to appear and make tmay11 cry for failing to understand basic accounting concepts ROYDRAGE HRRRUUUUUGGGGHHHHH[/quote]
lmao
But yeah, if you don’t get it after into, switch majors.
[quote]LankyMofo wrote:
But wait, aren’t you paying a university to teach this to you? Surely they should be able to help. ;)[/quote]
two things:
-
Did you see the new exam format? LOL, looks so shitty.
-
Did you read the letter section of this month journal? LOL @ hwo similar the bitching and moaning about the good old days is to what goes on here sometimes.
[quote]countingbeans wrote:
[quote]LankyMofo wrote:
But wait, aren’t you paying a university to teach this to you? Surely they should be able to help. ;)[/quote]
two things:
-
Did you see the new exam format? LOL, looks so shitty.
-
Did you read the letter section of this month journal? LOL @ hwo similar the bitching and moaning about the good old days is to what goes on here sometimes.[/quote]
in 2011 the CPA exams will ask you to know both GAAP and IFRS, how super ghey
[quote]tmay11 wrote:
[quote]LankyMofo wrote:
Assets and expenses normally have debit balances.
Liabilities, equity and revenues normally have credit balances.
Every journal entry must balance - debits must equal credits. That sets up the most basic equation in accounting:
Assets = liabilities + Equity
So if you’re entering a simple journal entry - for example - selling a product.
You’re getting cash so you would DEBIT cash because it’s an asset (ie, increase cash).
You’re also recording revenue so you would CREDIT the revenue (ie, increase revenue) account.
Make sense?[/quote]
Yes, this makes sense. I can look at the equations and it makes sense. The confusion lies in using the same term to me opposite things. Why is a “debit” an increase in an asset or expense account and a “credit” a decrease. Whereas in a liability or equity account a “debit” is a decrease and a “credit” and increase.
Is this just the way the terms have been defined and it’s simply a matter of learning when a “debit” means increase and when it means decrease? Or is there some logic behind this that i’m missing?
Thanks.
[/quote]
YOu are approaching it the wrong way. Rather than worry about what a debit or credit will do, worry about what balance an account should be, and what you want to happen.
You made a sale, you want your sales account to increase, sales is a revenue account, which is a credit balance… So you credit sales to increase it.
You bought a truck, you want your fixed assets to increase, fixed assets is a debit balance account, you should debit the fixed assets.
Your investment fucking tanked, you want your investment account to go down, investments is an asset, assets are debit balances, so you credit the asset.
etc…
[quote]therajraj wrote:
[quote]countingbeans wrote:
[quote]LankyMofo wrote:
But wait, aren’t you paying a university to teach this to you? Surely they should be able to help. ;)[/quote]
two things:
-
Did you see the new exam format? LOL, looks so shitty.
-
Did you read the letter section of this month journal? LOL @ hwo similar the bitching and moaning about the good old days is to what goes on here sometimes.[/quote]
in 2011 the CPA exams will ask you to know both GAAP and IFRS, how super ghey[/quote]
I don’t have an issue with content, other than the study guides will suck for about 5 or six years.
The format is worse now
[quote]countingbeans wrote:
[quote]therajraj wrote:
[quote]countingbeans wrote:
[quote]LankyMofo wrote:
But wait, aren’t you paying a university to teach this to you? Surely they should be able to help. ;)[/quote]
two things:
-
Did you see the new exam format? LOL, looks so shitty.
-
Did you read the letter section of this month journal? LOL @ hwo similar the bitching and moaning about the good old days is to what goes on here sometimes.[/quote]
in 2011 the CPA exams will ask you to know both GAAP and IFRS, how super ghey[/quote]
I don’t have an issue with content, other than the study guides will suck for about 5 or six years.
The format is worse now
[/quote]
Really? I was about enroll with Becker… bad idea?
Any tips for this whole CPA exam process in general? I’m planning to write anywhere I’m elgible to sit.
[quote]therajraj wrote:
[quote]countingbeans wrote:
[quote]therajraj wrote:
[quote]countingbeans wrote:
[quote]LankyMofo wrote:
But wait, aren’t you paying a university to teach this to you? Surely they should be able to help. ;)[/quote]
two things:
-
Did you see the new exam format? LOL, looks so shitty.
-
Did you read the letter section of this month journal? LOL @ hwo similar the bitching and moaning about the good old days is to what goes on here sometimes.[/quote]
in 2011 the CPA exams will ask you to know both GAAP and IFRS, how super ghey[/quote]
I don’t have an issue with content, other than the study guides will suck for about 5 or six years.
The format is worse now
[/quote]
Really? I was about enroll with Becker… bad idea?
[/quote]
no, do it and pass everything before 2011.
They have no idea what is going to be tested until they release answers, so the study guides are behind the curve.
[quote]therajraj wrote:
Any tips for this whole CPA exam process in general? I’m planning to write anywhere I’m elgible to sit.[/quote]
Take your weakest areas first.
Thank you countingbeans and lankymofo. I understand this all now, just took a bit of review.
[quote]tmay11 wrote:
[quote]LankyMofo wrote:
Assets and expenses normally have debit balances.
Liabilities, equity and revenues normally have credit balances.
Every journal entry must balance - debits must equal credits. That sets up the most basic equation in accounting:
Assets = liabilities + Equity
So if you’re entering a simple journal entry - for example - selling a product.
You’re getting cash so you would DEBIT cash because it’s an asset (ie, increase cash).
You’re also recording revenue so you would CREDIT the revenue (ie, increase revenue) account.
Make sense?[/quote]
Yes, this makes sense. I can look at the equations and it makes sense. The confusion lies in using the same term to me opposite things. Why is a “debit” an increase in an asset or expense account and a “credit” a decrease.
Whereas in a liability or equity account a “debit” is a decrease and a “credit” and increase. Is this just the way the terms have been defined and it’s simply a matter of learning when a “debit” means increase and when it means decrease? Or is there some logic behind this that i’m missing?
Thanks.
[/quote]
I actually had an edit in there that explained this but it didn’t show up. It’s just one of those things you’re going to have to memorize and accept. Whoever invented accounting set it up as a double sided entry system and they said “all assets shall maintain debit balances, all liabilities shall maintain credit balances…etc.”
I don’t wanna go off too far into a tangent, but some people get confused because of their own bank account. When they deposit money into the account the bank “credits” the account. The cash is your asset, so why are they crediting the account? It’s because that money that you gave the bank is the bank’s liability. They owe you that money, so from their perspective they credit the account.
Once you get this stuff memorized and get your head wrapped around it, things will either get very easy or very difficult. If it gets even more difficult, don’t be an accounting major. If it gets easier, you’re in good shape.
And rajraj - we were posting all kinds of tips and shit in the other accounting thread, if you can find a link to it you might want to read it.
[quote]countingbeans wrote:
[quote]tmay11 wrote:
[quote]LankyMofo wrote:
Assets and expenses normally have debit balances.
Liabilities, equity and revenues normally have credit balances.
Every journal entry must balance - debits must equal credits. That sets up the most basic equation in accounting:
Assets = liabilities + Equity
So if you’re entering a simple journal entry - for example - selling a product.
You’re getting cash so you would DEBIT cash because it’s an asset (ie, increase cash).
You’re also recording revenue so you would CREDIT the revenue (ie, increase revenue) account.
Make sense?[/quote]
Yes, this makes sense. I can look at the equations and it makes sense. The confusion lies in using the same term to me opposite things. Why is a “debit” an increase in an asset or expense account and a “credit” a decrease. Whereas in a liability or equity account a “debit” is a decrease and a “credit” and increase.
Is this just the way the terms have been defined and it’s simply a matter of learning when a “debit” means increase and when it means decrease? Or is there some logic behind this that i’m missing?
Thanks.
[/quote]
YOu are approaching it the wrong way. Rather than worry about what a debit or credit will do, worry about what balance an account should be, and what you want to happen.
You made a sale, you want your sales account to increase, sales is a revenue account, which is a credit balance… So you credit sales to increase it.
You bought a truck, you want your fixed assets to increase, fixed assets is a debit balance account, you should debit the fixed assets.
Your investment fucking tanked, you want your investment account to go down, investments is an asset, assets are debit balances, so you credit the asset.
etc…[/quote]
Looking at it this way cleared things in almost immediately. It just seemed very strange upon first review, especially having the bank “credit” your account when you make a deposit like lankymofo said…
Thanks for the help.
I know nothing about debits/credits, but I used to do software for a company doing all kinds of integrations and functions with their accounting system. They used a package called Sage Accpac. If any of you comptrollers out there ever recommend this program, and I end up working on it, I will end you.
Seriously.
Sage makes Business Works, which is much better than quickbooks.
quickbooks is fucking shit balls stuck to the ass hair of the most veil wench of all time.