{"id":131,"date":"2020-09-14T08:26:00","date_gmt":"2020-09-14T07:26:00","guid":{"rendered":"https:\/\/www.thetrainingplace.org\/blog\/2020\/09\/14\/double-entry-for-beginners-part-2\/"},"modified":"2024-11-22T14:15:23","modified_gmt":"2024-11-22T14:15:23","slug":"double-entry-for-beginners-part-2","status":"publish","type":"post","link":"https:\/\/www.thetrainingplace.org\/blog\/2020\/09\/double-entry-for-beginners-part-2\/","title":{"rendered":"DOUBLE ENTRY FOR BEGINNERS – PART 2"},"content":{"rendered":"

DOUBLE ENTRY FOR BEGINNERS – PART 2<\/span><\/u><\/b>\u00a0<\/span><\/span><\/u><\/b><\/p>\n

SALES SCENARIOS- PART 2<\/span><\/u><\/b><\/p>\n

Financial Accounts are built on the double entry principle which states that:<\/span><\/p>\n

FOR EVERY DEBIT ENTRY, THERE MUST BE A CORRESPONDING CREDIT ENTRY; <\/span><\/b><\/p>\n

So, in posting any transaction into your accounts, you always need to identify which account needs to be debited and which account needs to be credited. <\/span><\/p>\n

A common acronym used to learn the double entry is DEAD\/ CLIC<\/span><\/b><\/span><\/p>\n

DEAD\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 CLIC<\/span><\/b><\/p>\n

Debit: Expenses, Assets, Drawings\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 <\/span>Credit: Liabilities, Income, Capital<\/span><\/b><\/p>\n

DEBIT TRANSACTIONS\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 <\/span>CREDIT
\nTRANSACTIONS<\/span><\/b><\/p>\n

If any of these are increasing, If any of these are increasing,\u00a0<\/span><\/i><\/b>you will need to debit the account you will need to credit the account\u00a0<\/span><\/i><\/b><\/i>and vice versa, if it is decreasing and vice versa, if it is decreasing<\/span><\/i><\/b>\u00a0<\/b><\/p>\n

Let\u2019s introduce VAT to the previous scenarios:<\/span><\/b><\/p>\n

VAT is tax on commodities and the VAT on sales is a liability to companies, because it is
\ncollected from customers and paid to <\/span>the government <\/span>and VAT on purchases is an asset because it can be claimed back by VAT registered businesses. This means that a VAT registered business must charge VAT on its sales and this is payable to <\/span>the government<\/span> and it can reduce this liability by any VAT it may have paid, i.e. VAT on purchases. VAT is currently charged at 20% standardly. (Please note that this statement has been kept to the simple basics).<\/i><\/span><\/p>\n

1. <\/span>If a customer buys products worth \u00a3230 net from you and doesn\u2019t pay immediately, i.e. credit sale. In such situation, a sale has taken place, you will have to pay VAT on the sale and a debtor has been established since the customer owes you the full amount. Invariably, sales have increased, as you have sold products; VAT liability has increased, as you owe <\/span>the government<\/span>; and debtors (asset) has also increased.\u00a0<\/span>\u00a0<\/span><\/p>\n

Net amount\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 <\/span>\u00a3230.00<\/span><\/p>\n

VAT amount (20% x \u00a3230)\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 \u00a0\u00a0 \u00a346.00<\/span><\/p>\n

Gross amount (total amount owed) \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0\u00a3276.00<\/span><\/p>\n

Accounts affected:<\/span><\/p>\n