Take some time to understand the new technical terms in accounting. Often, the same terms used in accounting are different from ordinary usage.
For example, purchases used in ordinary usage means buying, but accounting has a more precise meaning. Let us think on what it could mean in the context of accounting. That would be buying of goods meant for resale. Therefore if a car dealer buys a computer, it cannot be describe as a “purchase”. It should be treated as buying a “fixed asset”.
On other hand, a credit nature account increases when it is credited and decreases when it is debited.
All accounts have a nature, be sure to memorize the nature of the major categories of accounts before proceeding to learn double entry. Not knowing the nature of the accounts is like not knowing the ABCs.
Debit Nature – Purchases, Expenses, Assets (PEA) Credit Nature – Revenue Liabilities Sales (RLS)
Using the first alphabet of each word, the acronym PEA,RLS can help you to memorize the nature. Beginner students often think debit increases and credit decreases. This is only true if the account is debit nature. A credit nature account increases by crediting, and decreases by debiting.
Seek a good instructor, good books to master double entry. Students who fail to master double entry will find great difficulty in grasping future concepts understanding chapters such as correction of errors, depreciation and provision for doubtful debts etc.
Follow these 4 tips and you will be on track to mastering the subject!
Clear Concise Accounting – POA Guide Book
William is the author of the popular POA guide book “Clear Concise Accounting”. Pellentesque quam sapien, aliquam mollis dapibus id, mollis sit amet augue.
Fusce molestie, mi non molestie accumsan urna. Pellentesque quam sapien, aliquam mollis dapibus id, mollis sit amet augue. Fusce molestie, mi non molestie accumsan urna.