Good evening everyone, and welcome to the latest ASN FREE Q & A session with Caroline Warburton from iCount on understanding double entry bookkeeping. If you have any questions, please post as a comment below. Please be aware, if any questions are left unanswered, then they will be answered at a later time. And thank you all for participating…..now over to you, who has the first question?
Natasha Everard Evening Caroline 🙂
Like · Reply · 7 July at 19:01
Caroline Warburton
Caroline Warburton Evening Natasha! Who would like to ask the first question? 🙂
Like · Reply · 7 July at 19:02
Natasha Everard
Write a reply…
Marie Evans
Marie Evans Good evening everyone, trying to think of a question but have so many! I’ll start with have you got an idiots way of learning double entry I’ve been working on it for 7 months and it still hasn’t gone in
Like · Reply · 2 · 7 July at 19:02
Hayley-Roxanna Banford
Hayley-Roxanna Banford Hi. I’m about to start studying double entry & wondered if there was any tips on the best place to start?
Like · Reply · 1 · 7 July at 19:04
Caroline Warburton
Caroline Warburton Its a tricky subject thats for sure…There are some mneumonics such as DEAD CLIC, Which applies when you increase an account, so Debit, Expense, Asset, Drawing (DEAD) to Increase them, and Credit Liability Income Capital (CLIC)
Like · Reply · 1 · 7 July at 19:04
Caroline Warburton
Caroline Warburton If you wabt to reduce the account, you would do the opposite to Dead CLIC, so to reduce and expense you woudl credit it, and to reduce a liability you would debit it
Like · Reply · 7 July at 19:05
Natasha Everard
Write a reply…
Caroline Warburton
Caroline Warburton Thats just one to go through…I always like to use the bank as a great starting point…the bank is an asset, so if I was to increase the bank I would always debit the account.
Like · Reply · 1 · 7 July at 19:05
Caroline Warburton
Caroline Warburton If you can get the bank right, then you can always work out the oppostie side, as we all know our Debits must always equal our credits
Like · Reply · 1 · 7 July at 19:06
Caroline Warburton
Caroline Warburton Hi Hayley-Roxanna Banford I think I would start with the dual effect – in that every transaction has two effects. So, to break it down from the very beginning, lets say we want to buy a computer for cash, well we have got more assets in the form of the computer, but your bank account which is also an asset will be going down
Like · Reply · 7 July at 19:07
Caroline Warburton
Caroline Warburton so if your asset computer is increasing you would debit the Computer Equipment account to increase the asset, and to reduce the bank asset you would credit the bank…does that help at all Hayley-Roxanna Banford? 🙂
Like · Reply · 7 July at 19:08
Hayley-Roxanna Banford
Hayley-Roxanna Banford Thank u – I think the DEADCLIC pneumonic is useful are there any other pneumonics?
Like · Reply · 1 · 7 July at 19:10
Natasha Everard
Natasha Everard Control accounts posting can be confusing…is there a way you can remember them easier?
Like · Reply · 2 · 7 July at 19:10
Caroline Warburton
Caroline Warburton They are tricky, you are right! I always think that the names of the accounts can help…what I mean by that is Receivables are money we are going to receive when we receive the money from the customer, so its an asset until we actually receive the money when we put it into the bank account
Like · Reply · 7 July at 19:13
Caroline Warburton
Caroline Warburton For Payables, its the amount you owe to your suppliers, so that will be a liability, until you make the payment from the bank.
Like · Reply · 7 July at 19:16
Ruhina Ali
Ruhina Ali Debtors means Sales Ledger Control Ac are in debit side and creditors means Purchase Ledger Control Ac are in credit side this way I think more easier.
Like · Reply · 7 July at 19:52
Natasha Everard
Write a reply…
Caroline Warburton
Caroline Warburton There are a few other mneumonics…PEARLS is another one… On the Debit side you would put the Purchases, Expenses, Assets, and on the Credit Side, Revenue, Liability, Sales.
Like · Reply · 7 July at 19:12
Marie Evans
Marie Evans For DEADCLIC what is the difference between Income and Capital?
Like · Reply · 1 · 7 July at 19:12
Caroline Warburton
Caroline Warburton Hi Marie Evans Income is usually the sales your business makes, so as a retailer the items you sell would be the income you generate.
Like · Reply · 7 July at 19:14
Caroline Warburton
Caroline Warburton Capital is the amount of money or goods the owner of the business has put into the business, so if you decided to start a business by putting in £10,000, you would Debit the bank to increase the Asset, and credit the capital account, which actually shows as a special type of liability, it is the amount of money the business owes back to the owner…hope that helps! 🙂
Like · Reply · 7 July at 19:15
Caroline Warburton
Caroline Warburton Remeber the owner of the business is always a separate entity to the business itself, so if the owner puts some money in, they are owed the money back from the business
Like · Reply · 7 July at 19:17
Caroline Warburton
Caroline Warburton I always think that when you start learning Double entry it is like learning a foreign language, but the more you practice the easier it gets! And one day….its just comes naturally!! Honestly! 😉
Like · Reply · 1 · 7 July at 19:19
Marie Evans
Marie Evans Thank you. I can see what you are saying, but whether I can remember when I finally get round to booking my exams is another thing
Like · Reply · 1 · 7 July at 19:19
Marie Evans
Marie Evans It feels like I’m learning every language in the world and getting myself so confused!
Like · Reply · 1 · 7 July at 19:21
Caroline Warburton
Caroline Warburton If you need an approach to take, definitely try breaking the transaction down, and think 1 – which accounts are affected 2 – are they going up or down 3 – then apply the rules learnt for when to debit and when to credit that way you wont get in a tangle! 🙂
Like · Reply · 7 July at 19:21
Keri Hemingway
Keri Hemingway Do you have any recommendations for practice resources? i have my Premier Training Revision Kit and the AAT website but I’m keen to practice as much as possible to get ready for the exam and think different books or sites might be helpful too.
Like · Reply · 2 · 7 July at 19:21
Caroline Warburton
Caroline Warburton I would definitely recommend the green light tests, and the sample assessments on the AAT website, there are also other publishers who produce revision kits which can be useful such as Kaplan, Osborne and BPP who all produce revision kits as well.
Like · Reply · 1 · 7 July at 19:24 · Edited
Caroline Warburton
Caroline Warburton Would it help if we did a couple of examples?
Like · Reply · 1 · 7 July at 19:25
Natasha Everard
Natasha Everard Yes please 🙂
Like · Reply · 7 July at 19:25
Marie Evans
Marie Evans That would be great – yes please
Like · Reply · 7 July at 19:25
Caroline Warburton
Caroline Warburton Lets buy some goods on credit from one of our suppliers for £1000 plus VAT.
Like · Reply · 1 · 7 July at 19:25
Caroline Warburton
Caroline Warburton So, we have a total invoice of £1200 which we owe to our supplier – this is one of our payables, which means we have a liability for the gross amount, so to increase a liability we would credit the payables
Like · Reply · 1 · 7 July at 19:26
Caroline Warburton
Caroline Warburton As we have credited the payables we know we must then debit the other accounts…
Like · Reply · 1 · 7 July at 19:27
Caroline Warburton
Caroline Warburton So where else will be affected…we have bought some goods on credit, these are purchases. Purchases are actually an expense so to increase an expense we would debit the expense with the value of the goods…£1000
Like · Reply · 7 July at 19:28 · Edited
Marie Evans
Marie Evans I totally got that wrong! I was trying to be clever and answer the question
Like · Reply · 7 July at 19:28
Caroline Warburton
Caroline Warburton Finally we have a balance of £200 which is VAT, and as we can reclaim VAT on our purchases this will always reduce the liability to HMRC so we would debit the VAT account
Like · Reply · 7 July at 19:29
Caroline Warburton
Caroline Warburton So to summarise… Dr Purchases £1000, (increase expense) Dr VAT £200 (reduce liability), Cr Payables £1200 (increase liability)
Like · Reply · 7 July at 19:30
Marie Evans
Marie Evans Is there a way of breaking questions like these down? I completely got it wrong
Like · Reply · 7 July at 19:31
Caroline Warburton
Caroline Warburton Hi Marie Evans I usually approach the questions in the same way, 1- which accounts, 2- are they going up or down, 3 – will we debit or credit to increase
Like · Reply · 1 · 7 July at 19:32
Caroline Warburton
Caroline Warburton Lets try…Selling some goods for £500 for cash (ignore VAT)
Like · Reply · 7 July at 19:32
Caroline Warburton
Caroline Warburton We have got £500 of cash which is an asset, so we need to increase the asset, so we would Debit Cash…
Like · Reply · 7 July at 19:33
Caroline Warburton
Caroline Warburton We have also made a sale, which will increase our sales which are a form of income, so to increase the income we would credit Sales
Like · Reply · 7 July at 19:34
Caroline Warburton
Caroline Warburton To summarise Dr Cash £500 (increase asset), Cr Sales £500 (increase income)
Like · Reply · 1 · 7 July at 19:34
Marie Evans
Marie Evans Ah ha I see it – was getting stuck on the terminology
Like · Reply · 7 July at 19:35
James Gilleade-Smith
James Gilleade-Smith If someone is on the flat rate scheme for VAT, when they get an invoice for standard rate how would that appear as an example it was 120 including VAT. How would I input that in the VAT CONTROL. Normally I woould debit the expense 100 and the VAT 20 and credit the bank. Because of the flat rate schem would this increase the net total? What happens to the extra?
Like · Reply · 7 July at 19:35
Caroline Warburton
Caroline Warburton Hi James Gilleade-Smith, this is a very specific area of VAT – I will admit Im certainly not a tax expert… With regards to the flat rate scheme you dont reclaim the VAT on the purchase invoices but just calculate the amount owed to HMRC on the taxable turnover…As I mentioned, Im not a tax expert by any stretch!!
Like · Reply · 1 · 7 July at 19:42
James Gilleade-Smith
James Gilleade-Smith I don’t know why I didn’t even think that your right
Like · Reply · 7 July at 19:56
Natasha Everard
Write a reply…
Natasha Everard
Natasha Everard Does anyone else have any questions for Caroline this evening?
Like · Reply · 7 July at 19:44
Natasha Everard
Natasha Everard If no one has any further questions, i would like to thank Caroline for her excellent Q & A again. Thank you for your time. Really appreciate it.
Like · Reply · 2 · 7 July at 19:47
Caroline Warburton
Caroline Warburton You’re very welcome Natasha! 🙂
Unlike · Reply · 2 · 7 July at 19:48
Natasha Everard
Write a reply…
Marie Evans
Marie Evans Thank you for your time – I think I’ll have to go through all my notes again
Like · Reply · 7 July at 19:47
Paula Rutter
Paula Rutter it will click. honest. took me 6 months xx
Like · Reply · 7 July at 20:13
Marie Evans
Marie Evans Thank you i’ve been at it for 7 months, study everyday but doesn’t feel like it’s going in, I’m passing each assessment but when it comes to something like this evening it seems I haven’t learnt anything! Sometimes I just want to give up, but I’m too stubborn xx
Like · Reply · 1 · 7 July at 20:26
Paula Rutter
Paula Rutter don’t give up hun. It took me a year to do level 2 and I’m now on my 4th unit of level 3 so that will be a year and a half when I finish this level. it will get harder but it will also get easier and more enjoyable
Like · Reply · 1 · 7 July at 20:27
Marie Evans
Marie Evans thank you. This will not beat me! I will get there xx
Like · Reply · 1 · 7 July at 20:40
Natasha Everard
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Marie Evans
Marie Evans I really enjoyed this session
Like · Reply · 1 · 7 July at 19:48
Caroline Warburton
Caroline Warburton Just give me a shout anytime if you have any questions! 🙂 You will get there Im sure!
Unlike · Reply · 2 · 7 July at 19:48
Marie Evans
Marie Evans I might take you up on that!
Like · Reply · 1 · 7 July at 19:49