Hi,
I’m teaching myself accounting. I’m just starting, so I am relying exclusively on textbooks and websites.
Am I correct in assuming that I can go by the Chart of Accounts to determine whether to enter an account on the debit side or credit side of a T-account?
I drew up a long list of account types based on the Chart of Accounts and accounting questions. I didn’t think the general list provided in textbooks or websites of what to put on either side comprehensive enough.
eg. on the debit side: e.g. loan interest, premises repairs, traveling expenses, insurance
on the credit side:e.g… loan interest received, depreciation of motor vehicle, bank overdraft
I hope these examples are correct. If you have other suggestions of how to come up with the proper placement of accounts (debit-side or credit -side) I would like to know. So far, the Chart of Accounts and looking at Accounting questions has helped me more.
Not quite sure I understand your question. Let’s try this.
The chart of accounts lists the various Asset, Liability, Income and Expense accounts. Each and every one of those accounts is subject to possible debit or credit entries. It depends what you want to accomplish. The chart of accounts is fixed and does not change.
For example, if you issue a check in payment of some expense, you would debit the appropriate expense account. The offsetting entry would be a credit to the asset account called cash. You have decreased cash on hand and increased your total expenses.
If the payee sent the payment back (you goofed and paid the bill twice) you would credit the expense account and debit the asset account called cash.
So whether you make a debit or credit entry depends entirely on what you want to accomplish. Hope this helps.
I’ll add that most accounts in the COA have an expected debit or credit balance. In other words, we expect expenses and checking accounts to have a net debit balance, and we expect liabilities and income to have a net credit balance. However, it’s the individual transactions that determine the net balance, and it’s entirely possible to have net balance different from what we expect. A checking account with a credit balance (i.e. you’re overdrawn; it would be a negative balance on your statement). Or maybe you overpaid a credit card and so now it has a net debit balance.
To add to what’s already been said, there are some accounts that run contra to what is normally expected. These are unsurprisingly called “contra-accounts.”
For example, most assets normally have a debit balance, but accumulated depreciation is a contra-asset account and thus has a normal credit balance. Thus, the entry to record depreciation expense would be the following:
I hope that helps to explain things. Let me know if you have any additional questions – I am finishing my Master’s of Accountancy, so I can tell you more about accounting, US GAAP, and IFRS then you would probably *ever *want to know!
Thank you all. I think dracoi nailed it with:
COA have an expected debit or credit balance.。。。。。However, it’s the individual transactions that determine the net balance, and it’s entirely possible to have net balance different from what we expect.。That clears things up a lot.
Thanks TioGringo, I do have a further question for you. Since you are doing a Masters in Accounting you will no doubt have come across visuals of real ledgers to complete the accounting process (partial visuals as shown here: How to Write an Accounting Ledger (with Pictures) - wikiHow). I do realize accounting is mostly computerized these days, but it would be a much more interesting learning experience for me to see actual ledger entries for the entire accounting process (as shown here: http://www.accounting-basics-for-students.com/accounting-cycle.html).
Thank you all again. Very helpful.
davidmich
I meant to add that I’m also looking for visuals of real journal entries too (cash payments, sales, sales returns, purchases,purchases reruns and general journal)