The Bookkeeping Master

Debit or credit?😕

Many years ago, when I had more hair and a lot more energy, I attended evening classes at the local college. I was doing my first accounting qualification.

After a few weeks, we started learning about debits and credits. It made NO sense to me whatsoever. I was frustrated. I wanted to make a career in finance, but I couldn't understand basic debits and credits 😥 I was so disappointed in myself.

However, a few things helped to make them 'click'. Now, they are second nature to me. They are easy.

1️⃣ PEARLS. Learn the PEARLS acronym. This is Purchases, Expenses, Assets, Revenue, Liabilities, and Sales.
PEA = debit entries
RLS = credit entries

2️⃣ Let go of money in and money out. Apart from bank asset accounts, debit is not money in, and credit is not money out. This is not how double-entry works. Debits do not increase an account balance, and credits do not decrease an account balance.

3️⃣ Focus on the bank account. Many transactions will involve the bank account. Either payments in (receipts) or payments out. As mentioned, a debit is money going into the bank account, and a credit is money going out. Ask yourself, 'Does this transaction increase or decrease the bank account balance?' Answering this allows you to determine one side of the double-entry. Once you know one side, the other side is much easier.

4️⃣ Practice. I hate suggesting practice, and it sounds so obvious and dismissive. However, that is how we learn. The more you practice, the better you'll get.

Learn more: https://youtu.be/Fm9BECuNbkw
Ultimate Bookkeeping: https://bit.ly/44QgClw

F6! 💥

The year was 2010. I was a Sage trainer. The location? An accounting practice in Essex. I was hired to train 5 chartered accountants on Sage 50 Accounts. They knew the basics; I was there to teach them some of the fun and fancy bits of the software.

Sage 50 has shortcut keys. One of them is F6. This fills in the entry box using the information from the box above. Super efficient for bookkeeping. When I told them, there was disbelief followed by a shout of joy! They couldn't believe it. Such a simple shortcut would save them countless hours of data entry.

I'll always remember this. I don't know why. It may have been because I was young and inexperienced, teaching professionals. It may be because something I took for granted was a huge relief for others. I don't know.

The point is, no matter how inexperienced or experienced you are, it's essential to receive training. Accounting and accounting software are no different.

The good news is that on my website, you can learn for free:

Sage Accounting: https://bit.ly/4uWvGbP
Sage 50 Accounts: https://bit.ly/4ulJn2O
QuickBooks Online: https://bit.ly/3RY2ans
Xero: https://bit.ly/4xhzGVR

Peace out

⚠ Question ⚠

What is the accounting equation?

1️⃣ Assets = Liabilities - Equity
2️⃣ Sales - Cost of Sales = Gross Profit
3️⃣ Equity = Retained Earnings + Sales
4️⃣ Assets = Liabilities + Equity

🚨Stop scrolling for a second🚨

If you are a bookkeeping or accounting student, or in practice, there are key things you must know:

✅ Double-entry. You must know your debits and credits. Even if you're using accounting software. The easiest way to learn this is the PEARLS acronym. This is covered here: https://youtu.be/Fm9BECuNbkw

✅ The accounting equation. You'll never fully understand the balance sheet, accounting, and double-entry until you know the accounting equation. Assets = Liabilities + Equity. What does this actually mean, though? It means that when total assets increase, liabilities or equity must also increase. If the total assets fall, liabilities or equity must also fall. An example of this is paying off a loan. Assets (cash account) will decrease, and liabilities (loan account) will also decrease. Paying expenses, making sales, drawings, and all other transactions fall within the accounting equation. Learn more: https://youtu.be/nTAhyW9eF0w

✅ Accounting is amazing. It is the language of business. Understanding finance and accounting is a brilliant skill that can open many doors. If you love accounting, it will show. This will help with employment opportunities, job satisfaction, and uplift those around you. If you're not loving accounting, then find an area within finance and accounting that you do love. The industry is massive. I'm confident there is something for you.

‼ Here's the harsh truth ‼

If you don't know what you're doing, it will eventually catch up with you. Guessing or winging it in bookkeeping, accounting, or taxation is not going to end well. Believe me.

This is what you must do:

✅ Educate yourself. Learn as much as you can from reliable resources and professional educators. Fill your gaps. Learn it so many times that it becomes second nature. Here are the key resources:

1️⃣ Learn for free on my website. No registration is required. You can learn everything from the essentials, like double-entry bookkeeping, to preparing year-end accounts: https://www.freebookkeepingaccounting.com/free-bookkeeping-accounting-courses

2️⃣ If your needs are more specific or you prefer one-to-one support, then get a mentor: https://www.freebookkeepingaccounting.com/services/accounting-mentorship

3️⃣ Consider a bookkeeping, accounting or taxation qualification. There are many to choose from.

❌ Don't rely on your friend at the pub or think you can do your tax return without any training. This usually always ends badly and can be costly.

✅ If you're not willing to put in the time, money, and energy to learn your debits and credits, reconcile bank accounts, or learn how to effectively save tax, then consider outsourcing. This is the way. I'm taking new clients now: https://www.smaccountinguk.com/

❌ Don't bury your head in the sand and try to forget about it. The bookkeeping must be done. The tax must be calculated and paid. There is no escape 😱