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SESSION 1 - DEBITS AND CREDIT (SAMPLE):
(Exerts from - ACE-LIP METHOD EXPLAINED)
TUTOR: . . . . . .
It's very important to
know what type of balance each group of accounts normally
has. You will see how important this is when we get to Session 3. Let me show
you a
method that will help you to understand debits and credits better (See Fig.
1-1).
STUDENT: That's great. It makes it much easier for me to
understand. Let me study this
page (Fig. 1-1) for a while and see if I can repeat it back to you.
TUTOR: Are you ready?
STUDENT: I think so, let's see. There are six groups of accounts and they are
Assets,
Liabilities, Proprietorship, Income, Cost and Expenses. Three of the groups
normally
have debit balances and they are Assets, Cost, and Expenses. Three also normally
have credit balances and they are Liabilities, Income, and Proprietorship.
To increase the accounts that normally have debit balances, you would make a
"debit" entry and to decrease these accounts you would make a "credit" entry. To
increase the accounts that normally have credit balances, you would make a
"credit"
entry and to decrease these accounts you would make a "debit" entry. Did I do
Ok?
TUTOR: Yes, you did! You seem to know it well.
(Exerts from -WHEN DEBITS MEANS PLUS)
TUTOR: I think you know them very well now, let's go on. We
just went over the
effects of debits and credits on ledger accounts, what accounts have debit or
credit balances
and how to increase or decrease them. Now lets discuss debits and credits in
general.
STUDENT: You mean there's more I should know about debits and credits?
WHEN DEBIT MEANS PLUS
TUTOR: Yes there’s more to know - but only a little more. Many students have
trouble
with the concept of debits and credits. They think that debit always means to
add and credit
always means to take away. This is far from true and unless you understand when
debit
means to increase and credit means to decrease, you will have a lot of problems.
(Exerts from -NINE STEPS TO SOLVE A PROBLEM
Step 5 says to decide
what groups of accounts are affected by this transaction, (assets,
proprietorship, etc.).
In step 6, you would decide what accounts (Cash,
Accounts Payables, etc.) in the groups are affected.
Using what you learned in the ACE-LIP method, do step
7.