DOUBLE
ENTRY FOR BEGINNERS
SALES
SCENARIOS- PART 3
Financial
Accounts are built on the double entry principle which states that:
FOR EVERY DEBIT ENTRY, THERE MUST BE A
CORRESPONDING CREDIT ENTRY;
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.
A common
acronym used to learn the double entry is DEAD/ CLIC
DEAD CLIC
Debit: Expenses, Assets, Drawings Credit: Liabilities, Income, Capital
DEBIT TRANSACTIONS CREDIT
TRANSACTIONS
If any of these are
increasing, If
any of these are increasing,
you will need to debit the
account you will need
to credit the account
and vice versa, if it is
decreasing and vice
versa, if it is decreasing
Let’s test ourselves:
Please go through
the sales scenarios Part 1 and Part 2 teachings and now test yourself; what
will be the double entry posting for each of these, where VAT is charged at 20%:
1. If you sell
£340 net worth of products to a customer and payment was made immediately into
the bank account.
2. If you sell
£90 net worth of products and payment was not made immediately.
3. If you sell
£245 net worth of products and payment was made in 30days.
4. If you sell
£370 net worth of products and payment was not made immediately.
5. If you sell
£150 net worth of products and payment was made immediately in cash.
Answers:
Dr-
Bank (asset) £408
Cr-
VAT (liability) £68
Cr-
Sales (income) £340
Dr-
Debtors (asset) £108
Cr-
VAT (liability) £18
Cr-
Sales (income) £90
Dr-
Debtors (asset) £294
Cr-
VAT (liability) £49
Cr-
Sales (income) £245
Dr-
Debtors (asset) £444
Cr-
VAT (liability) £74
Cr-
Sales (income) £370
Dr-
Cash (asset) £180
Cr-
VAT (liability) £30
Cr-
Sales (income) £150
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