Assets, Capital and Liabilities [Archive]

hellonwheels

25-08-03, 00:00

Hi Missy, This is something which is easy to struggle over, but is very basic once you get to grips with it. My tutor from evening classes taught us to remember it this way: visualise a t-account for bank or cash. The left hand side (or debit) is for money coming IN to the account, and the right hand side (or credit) is for money going OUT. Picture also what transactions need to be performed in the future when actually paying for the goods, in respect of the bank/cash, then you can work backwards to sort out the initial entries e.g. Purchase stock on credit Â£500 Dr Stock account 500 Cr Creditors account 500 Pay for the goods: Dr Creditors account 500 Cr Bank/cash 500 All entries have to appear as double-entry, so an equal and opposite transaction has to appear in the assets/liabilities/capital accounts. Also always remember that an asset is something which is OWNED by the business, and liabilities are something which is OWED to other businesses. And the crucial A - L = C or A = L + C Have I explained that ok??! Probably not!! If you need to contact me further, please e-mail hlwheel@aol.com Good luck!! Helen.

Missy

25-08-03, 00:00

Thanks for the tip. Hadn't thought about it quite that way. Looking at it now that makes alot of sense. Really very appreciated that you replied to my question. Any probs I'll let you know.

Scotty

26-08-03, 00:00

Hiya. In addition to what was said before it's worth remembering the following:- Asset Increase is a Debit Asset Decrease is a Credit Liability/Capital Increase is a Credit Liability/Capital Decrease is a Debit As long as you remember one of these e.g. first A.I.D, you can work the rest out. Hope this helps, Scotty.