I am wondering if someone can help explain the debits and credits. I am a bookkeeper and can do most things but when it comes to reversing a journal i get it wrong every time. How do i reduce my wages control account as i posted a bank payment to it and now want to allocate the paye etc. I also posted 2 salary advances to the wrong code and cannot work out this jornal. I would like to create a journal to clear my wages control for end of year as it is looming.
There mst be a simple way to know which way round things go....please if anyone has an easy way to sort out my problem i would be most gratefull. How can it sink in so my journals are easy???????????
How do i reduce my wages control account as i posted a bank payment to it and now want to allocate the paye etc.
Standard Wages Journal is:
DR: Gross Wages (Expense increase)
DR: Employers NI (Expense increase)
CR: PAYE & NIC (Liability increase)
CR: Net Wages (Liability increase)
At the moment you will have a DR balance to the Wages control as you have posted the payment to it (reducing the liability so a DR Balance) This journal will clear it down assuming the net wage figure matches your bank payment of course...
The bank payment entry you have made is (was):
DR: Net Wages (Liability Decrease)
CR: Bank (Asset Decrease)
I also posted 2 salary advances to the wrong code and cannot work out this jornal. I would like to create a journal to clear my wages control for end of year as it is looming.
The original posting would have been CR Bank (Reducing Asset) DR - (Wrong code) To correct this just DR: Wages Control and CR whatever 'wrong code' you posted it to originally.
There mst be a simple way to know which way round things go....please if anyone has an easy way to sort out my problem i would be most gratefull. How can it sink in so my journals are easy???????????
Hope this helps - trust me, one day it will 'click' and you wont look back!
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I always found it easier to start with Cash... 'Cash is King', and also use your 'T' accounts. I still have 'T' accounts scattered around my desk, I think it should be standard practice in any bookkeepers day.
If you think about a normal bank entry, for example, a payment for some stamps... your Bank a/c entry will always be CR, and Postage a/c DR. So when thinking about any payment going through the bank.. the opposite (reversing) entry would be to DR the bank a/c.
I was told a great little mnemonic to remember which things are debits and which are credits: DEAD CLIC.
To increase by using a debit, on the left, use the word which is on the left: DEAD = Debtors Expenses Assets Drawings To increase by using a credit, on the right, use the word which is on the right: CLIC = Creditors Liabilities Income Capital
First letters, "D", for debit, is on the left; "C", for credit, is on the right.
So, in the above example, "a payment for some stamps": the payment is a decrease to the bank, which is an asset, and since increasing an asset, "A", is on the left, a debit, then decreasing it must be the opposite, i.e. on the right, a credit; the stamps are an increase to that expense, and increasing an expense, "E", is on the left, a debit.
I'd never come across that one either. must jot it down somewhere.
Like Alison all that I do is remember that money into the bank is a debit and money out is a credit. everything else just falls into place from a combination of that and knowing how it should appear in the financial statements.
That said, like so many others when I first started it was pages and pages of rote learning until something clicked.
Don't know if you ever saw the episode of the Simpsons where they are training the dog (Santa's little helper) and the dog understands absolutely nothing. But, one day it's as though a fog lifts and the garbled mumblings transform to words that he understands.
I think bookkeeping can at times, espechially at the start be a lot like that in that one day things just all slide into place. How long it takes to get to understanding varies from person to person with a very few being naturals.
If you love the subject the understanding will come. Just stick with it,
kind regards,
Shaun.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Ooooooo. You need to come to eagle if you need help with debits and credits! Once we share with you how to understand the system properly it will stick forever, seriously!!!
Ali T accounts and good old pen and paper are king too! :)))
I always found it easier to start with Cash... 'Cash is King', and also use your 'T' accounts. I still have 'T' accounts scattered around my desk, I think it should be standard practice in any bookkeepers day.
If you think about a normal bank entry, for example, a payment for some stamps... your Bank a/c entry will always be CR, and Postage a/c DR. So when thinking about any payment going through the bank.. the opposite (reversing) entry would be to DR the bank a/c.
Anyway... T accounts all the way :)
My AAT tutor swears by this... always start with the bank. This combined with DEAD CLIC is a winning combination for T Accounts!
I agree, manual bookkeeping is so much simpler than Sage!!!