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Hi Sir, I am having trouble understanding on which entry do I debit on credit after going through Chapter 3. Although the general rules of the double entry are given, I am still rather confused, for example, in example 1 in chapter 3, in the sales account, if there is an increase of $800 in sales, this would lead to an increase in the asset in cash, shouldn’t we debit $800 in the sales account instead of crediting the sales account?
I am currently in chapter 14 and when using the indirect method, we have to sort out the tax liabilities and the non-current assets. When it comes to the opening balance in the T-accounts, how do I decide if the opening balance should be in the debit or credit? Likewise for the direct method in which we have to sort out the receivables and payables account, I am confused as to understanding the placement of the opening balance in either debit or credit.
I hope you can clear my doubts in regards to credit and debiting the T-accounts
Thank you.
Are you watching the lectures? (because there is no point in just using the notes without the lectures – it is in the lectures that we explain and expand on the notes)
The sales account is recording the income and so we credit the account to record income.
The other result of making the sale is that we will either have received cash or we will have a receivable for the amount owing. Therefore the other entry is to debit either cash or receivables – they are assets and we debit to record the asset.
With regard to sorting out tax liabilities etc., if we have an asset then we have a debit balance, if we have a liability then we have a credit balance.
Again, you do need to watch all of the lectures where time is spent explaining all of this.
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