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Sir, I feel confused about when should we Dr or Cr the amount in the question. I follow the rules stated in the notes ( eg: Dr if there is increase in the asset) but sometimes I choose the wrong side while I doing the test questions. would you mind to explain in details how to determine it?
When I started out I found acronym PEARLS useful.
The first three letters stand for purchases, expenses and assets. When these are increased it results in a debit entry.
The next three letters stand for revenue, liabilities and source of funds (capital). When these are increased it results in a credit entry.
Another tip I just remembered is this. There is always two sides to a transaction, and usually one is extremely obvious. Therefore, you can work out the other by elimination.
For example. if I incur an expense, I’m likely to pay out cash for it. Paying cash is clearly a credit entry, therefore the expense is a debit entry.
If my company pays a dividend, most like this will result in paying out cash. As paying out cash is a credit entry, the dividend will be recorded as a debit entry (in retained earnings).
If you make a sale on credit, you acquire a current asset (the receivable) which is obviously a debit entry, therefore the sale must be a credit entry.
Etc!
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