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NineFingers

Monkey
Sep 24, 2004
626
0
In a spare bedroom at the moment...
So I have this question in my accounting class that's asking me to chart account classification and normal balance as debit or credit. I understand the classification, I'm not sure how to determine if its debit or credit(left or right). My normal understanding of debit and credit is decrease and increase however in the book, it states that debit and credit simply means left or right. How do I determine if its one or the other??? I've read, and can't get this explanation.
TYPE OF ACCOUNT
STOCKHOLDERS EQUITY
NORMAL BALANCE
(increases balance)
DEBIT or CREDIT
 
MTB_Rob_NC

MTB_Rob_NC

What do I have to do to get you in this car TODAY?
Nov 15, 2002
3,428
0
Charlotte, NC
Your understanding is incomplete, you have to remember what side of the balance sheet the account lies. In this particular case you are on the liability/owner equity side, so a - balance would be an increase in stock holder's equity.


A good rule of thumb is to always follow a cash or similar transaction. If I am starting a business and I put in $100 in cash what is the entry?

Debit $100 to cash the offsetting credit would be to an equity account -$100

Eventhough it is a - it is an increase.
Make any sense?
 
reflux

reflux

Turbo Monkey
Mar 18, 2002
4,617
2
G14 Classified
Yup, divide the balance sheet into two parts - assets being one, liabilities and equity being the other.

Now, in regards to debits and credits, think of a T account (go to the book if you need clarification). A debit on a T a/c is on the left, that's it. A credit on a T a/c is on the right, that's it.

Back to the balance sheet. Assets have a normal debit balance. What Rob said, to increase an asset account, you "debit" it. On the other side of the balance sheet (liab and equity), you "credit" the accounts to increase them.

**It all comes down to thinking of debits and credits not as + or -, but as left and right**
 
B

BillT

Monkey
Dec 27, 2001
660
0
Florida - Land of big mountains :)
Basically, for assets a normal balance would be a debit and a normal balance for liabilities and OE is a credit. If you had a debit balance of say $100 for accounts payable (which would indicate you were owed $100 instead of owing a $100) it should be reclassed to a $100 debit balance for in the Accounts Receivable account.
 
N

NineFingers

Monkey
Sep 24, 2004
626
0
In a spare bedroom at the moment...
Mtb_Rob_FL said:
Your understanding is incomplete, you have to remember what side of the balance sheet the account lies. In this particular case you are on the liability/owner equity side, so a - balance would be an increase in stock holder's equity.


A good rule of thumb is to always follow a cash or similar transaction. If I am starting a business and I put in $100 in cash what is the entry?

Debit $100 to cash the offsetting credit would be to an equity account -$100

Eventhough it is a - it is an increase.
Make any sense?
Click to expand...
HMM..., I'M Re-reading this, and got it for the most part, I'm just having a hard time with some of these categories. I'm trying to print screen what I've got so far and reduce it for this site only I can't seem to get it small enough, got anny suggestions for MS picture it 7.0?
 
RhinofromWA

RhinofromWA

Brevity R Us
Aug 16, 2001
4,622
0
Lynnwood, WA
I suggest some T accounts. I hated them in school but if you are finding the Dr/Cr part confusing this might help you relieve your strife.

I hope they introduced you to "T" accounts already.

Assets = Liabilities + Equity

Make a bunch of large "T"s and put "cash" over one and "Stockholders Equity" above the other.

Double entry accounty works because it keeps the equation above balanced. Record an investment in the entity by increasing the cash account (Dr the account) and increasing the Equity account (Cr the account) If you Debited both account your equation would not be ballanced you would be doubled up on the Dr side.

:think:

Work with it on paper a couple times and see if you can see it visually. Or just right the entry out.

(edit: stupid columns wouldn't line up....let's see if this works)
.................................DR..........Cr
Cash.........................$100
......Equity...............................$100

If you Dedited both accounts you would have $200 in the Dr column and $0 in the Cr column. You are not in balance....a carnal sin of an accountant. :D
 
skyst3alth

skyst3alth

Monkey
Apr 13, 2004
866
0
Denver, CO
I just got a 95 on my accouting exam...go me!

-Any increase in assets should be debited
-Any decrease in assets should be credited
-Any increase in Liabilities and S/E should be credited
-Any decrease in Liabilities and S/E should be debited
-Any increase in expenses should be debited
-Any increase in revenue/sales should be credited
-Any increase in dividends/withdrawls should be debited

Assets

-Cash
-Accounts Recievable
-Notes Recievable
-Office Supplies
-Prepaid Insurance
-Prepaid Rent
-Inventory
-Office Equipment
-Computers
-Cars
-Trucks
-Building
-Land
-Copyright
-Brand Name

Liabilities

-Accounts payable
-Notes payable
-Mortage payable
-Unearned fees
-Taxes payable

Stockholders Equity

-Prefferred Stock
-Common Stock

Expenses

-Salaries Expense
-Rent Expense
-Advertising Expense
-Insurance Expense
-Etc. Etc. (anything ending with 'expense')

That should get you started...

-Adam
 
N

NineFingers

Monkey
Sep 24, 2004
626
0
In a spare bedroom at the moment...
OK, I found a chart for the major account categories, so this helps me answer my question, but I would like to understand the concept of debit(left) and credit(right). I'm taking this class online, so I'm self teaching myself by reading as I go...this concept doesn't make sense to me. I'm trying, this is more of a memorizing thing rather than an understanding isn't it?
 
MTB_Rob_NC

MTB_Rob_NC

What do I have to do to get you in this car TODAY?
Nov 15, 2002
3,428
0
Charlotte, NC
skyst3alth said:
I just got a 95 on my accouting exam...go me!

.....Expenses

-Salaries Expense
-Rent Expense
-Advertising Expense
-Insurance Expense
-Etc. Etc. (anything ending with 'expense')

That should get you started...

-Adam
Click to expand...
Expenses don't belong on the balance sheet. :eviltongu See if you would of had the :monkey: 's do your home work you coulda gotten a 100. :thumb:
 
skyst3alth

skyst3alth

Monkey
Apr 13, 2004
866
0
Denver, CO
Mtb_Rob_FL said:
Expenses don't belong on the balance sheet. :eviltongu See if you would of had the :monkey: 's do your home work you coulda gotten a 100. :thumb:
Click to expand...
Bah, well this isn't just for a balance sheet, it's in general.

I got 5 points off for doing a percent wrong. I get the whole thing right and then **** up trying to take 40% of an invoice. :stupid: :stupid:

-Adam
 
RhinofromWA

RhinofromWA

Brevity R Us
Aug 16, 2001
4,622
0
Lynnwood, WA
Mtb_Rob_FL said:
Expenses don't belong on the balance sheet. :eviltongu See if you would of had the :monkey: 's do your home work you coulda gotten a 100. :thumb:
Click to expand...
I am not seeing what you mean.

-Office Supplies
-Prepaid Insurance
-Prepaid Rent
-Inventory
-Office Equipment
-Computers
-Cars
-Trucks
-Building
-Land
-Copyright
-Brand Name
Click to expand...
can be considered assets.....normally people don't capitalize office suppies but if the ammount was large enough it could be treated as inventory-like account. Assets and some prepaid rent.....what am I missing? What were you eye balling?
 
Snacks

Snacks

Turbo Monkey
Feb 20, 2003
3,523
0
GO! SEAHAWKS!
RhinofromWA said:
I suggest some T accounts. I hated them in school but if you are finding the Dr/Cr part confusing this might help you relieve your strife.

I hope they introduced you to "T" accounts already.

Assets = Liabilities + Equity

Make a bunch of large "T"s and put "cash" over one and "Stockholders Equity" above the other.

Double entry accounty works because it keeps the equation above balanced. Record an investment in the entity by increasing the cash account (Dr the account) and increasing the Equity account (Cr the account) If you Debited both account your equation would not be ballanced you would be doubled up on the Dr side.

:think:

Work with it on paper a couple times and see if you can see it visually. Or just right the entry out.

(edit: stupid columns wouldn't line up....let's see if this works)
.................................DR..........Cr
Cash.........................$100
......Equity...............................$100

If you Dedited both accounts you would have $200 in the Dr column and $0 in the Cr column. You are not in balance....a carnal sin of an accountant. :D
Click to expand...
I loved T accounts in school :love: Seriously loved 'em :heart:

I'm a total visual person so they really helped me grasp the whole debit and credit thing.
 
MTB_Rob_NC

MTB_Rob_NC

What do I have to do to get you in this car TODAY?
Nov 15, 2002
3,428
0
Charlotte, NC
RhinofromWA said:
I am not seeing what you mean.


can be considered assets.....normally people don't capitalize office suppies but if the ammount was large enough it could be treated as inventory-like account. Assets and some prepaid rent.....what am I missing? What were you eye balling?
Click to expand...
I was just busting his chops is all.
 
MTB_Rob_NC

MTB_Rob_NC

What do I have to do to get you in this car TODAY?
Nov 15, 2002
3,428
0
Charlotte, NC
NineFingers said:
This stuff is giving me a headache... If anyone who enjoys this stuff wants some new hayes hfx 9 hd disc brakes, let me know. I've got about 25 more questions that just keep getting harder.
Click to expand...

:eek: :eek: :eek: Wait til you get to the present value of money and accounting for bonds and other revenue streams. :confused: :confused: :confused:


Then one day when you grow up you can be an accountant and get excited about stuff like this

http://www.ridemonkey.com/forums/showthread.php?t=111840

and spend all day on the :monkey:
 
MTB_Rob_NC

MTB_Rob_NC

What do I have to do to get you in this car TODAY?
Nov 15, 2002
3,428
0
Charlotte, NC
2 days, 2 threads 3 pages each about accounting on the :monkey: ?

What is wrong with you people :evil: :nope: :evil:
 
reflux

reflux

Turbo Monkey
Mar 18, 2002
4,617
2
G14 Classified
NineFingers said:
Ok...how about $5 a question, I'll post on here and paypal you :)
Click to expand...
Co'mon man, bribery and cheating is no way to get through school.

Accounting. How many people wake up in the morning and say, "Booya, double-sided entry mutha******s!"? Or, how many of us do you think got (and completely understood) accounting at our first or second glance? I'd be willing to be few of us (not including me) say that crap. Point being, accounting isn't easy to understand at first. We (hopefully I'm speaking for all of us) are more than willing to try and help you learn it, but giving you the answers isn't the way to do it.
 
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