Debits and Credits

We have received a number of questions regarding debits, credits and how to use them. The guide below will help you with the general rules for debits and credits

Profit & Loss Accounts -

To increase an income account you credit it.
To decrease an income account you debit it.
To increase an expense account you debit it.
To decrease an expense account you credit it.

For example, to record a bank fee for the month, DR bank fee expense, CR bank account.

Balance Sheet Accounts

Asset accounts - to increase you debit, to decrease you credit.
Liability accounts - to increase you credit, to decrease you debit.

For example, to record depreciation for the month, DR depreciation expense in the profit and loss accounts, CR accumulated depreciation in the balance sheet.

MYOB Card File Question

Different Currency in MYOB?

If you are a premier user and have either debtors or creditors who are in a different currency, you can set this up on the card tab for the supplier or customer.

This is on the main details screen of the card and you can select from a wide range of common currencies such as AUD, USD, NZD, GBP etc. Just select the appropriate currency when setting up the debtor or creditor.

Balance Forward / Opening Balances

Thanks to Jackie for this question!

Opening balances are used when you change over from one system to another. For example when you first set up a computerised system and change over from a manual system.

If you are starting a new computerised system, it is always best to start at end of financial year when the profit and loss accounts are all zero.

There will be balances in the balance sheet accounts but these can be brought in by either a journal entry or if the software allows, they have an opening balances field.

TIP - Remember if you are in the position of needing to load opening balances you will also need to load the individual debtors and creditors into the subsidiary ledger! The balance in the debtors and creditors accounts on the balance sheet will be brought in, but the individual transactions which make up the debtors and creditors subsidiary ledger will not be there.

Remember any specific questions, just email us at bookkeepingtutorial@gmail.com

MYOB & Quickbooks Questions

We are launching our new video tutorial range in a few weeks. The video tutorial covers all aspects of bookkeeping using both Quickbooks or MYOB. It will be offered on a module by module basis, such as Payroll, Creditors, Debtors, Setup. It will also be offered as a complete package.

The tutorial will be just like going to a class one on one, but you will be able to pause it and practice or play it as many times as you want whilst you are doing the function on your own screen on your own data.

To keep up to date on the release of the tutorials, make sure you join the newsletter of bookkeeping tips and news and we will keep you updated!

Journal Questions

There have been a number of "journal" questions emailed in recently. There is a double entry bookkeeping article link on one of the posts to explain the basics.

If you have a specific journal question, please email it and we will answer.

The main thing to remember when doing journal entries is that you will need to post two sides to the journal, a debit and a credit. There are always two sides to every journal.

The debit comes first, what account do you need to debit, for example are you increasing an expense? If so, you debit the expense code and credit another item such as a bank account?

For example, you have been charged a bank fee for the month. You would debit the "bank fee" account in your expenses and you would credit the bank account in the balance sheet.

If you are recording a journal for interest you may have received during the month, it would be a debit to the bank account in the balance sheet and a credit to the income received interest account in the profit and loss.

Sometimes a journal will effect only balance sheet accounts, sometimes it will effect only profit and loss accounts. More often however the journals will effect both the profit and loss accounts and the balance sheet accounts.

Remember any questions can be emailed for free to our email service!

Article - What is Double Entry Bookkeeping

If you are new to the wonderful world of Bookkeeping, you might find this article interesting. It is all about Double Entry Bookkeeping.

Read the article here - Double Entry Bookkeeping

Bookkeeping Tutorial

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