Jacksonville CPA | Growing Your Business

Good morning and welcome to the podcast. My name is Brandon Mcelroy and I’m the president of Mineva, Jacksonville based tax and accounting firm. If you’re Jacksonville, CPA is not giving you the information you need to grow your business to secure your financial future than schedule a free consultation at Jacksonville CPA dot com. Today we’re helping educate our clients and we’re going through a lecture on accounting lecture on the basics of accounting and the different terms, phrases, statements, reports that you should be familiar with. Um, so listening and hope you enjoy the word

debit simply means left. And the word credit means right.

Many students make the mistake of thinking that credit automatically means increase and debit therefore must be decreased. That’s just not the case. The reason for this is that when we deposit money in a bank, they tell us they’re going to credit our account and that’s an increase. So we think, oh well, credit must be an increase as we’re going to find out today what the bank is saying is technically correct, but it’s from their side of the transaction, not from our side. And we have to account for the transaction from our side. Okay. So when we say debit, it only means left. Would you say credit? It means right? Any numerical dollar value that gets debited goes on the left side of the vertical line. In any account, any amount that gets credited goes on the right side. It depends upon which account we are debiting or crediting to determine whether or not that debit or credit is an increase or a decrease. And we’re going to see momentarily how we figure that out. Okay? So repeat it to yourself as many times as necessary. Debit means left credit means right. Okay. Jacksonville CPA I go back here. See in a second you’ll still hear me

okay. As previously stated, debit double entry accounting says every transaction affects two or more accounts. And we are always imbalanced. Debits must always equal credits. You have to remember that debits must always equal credits. All right. Notice we didn’t put an account name here because we’re illustrating a point on the power point slide that we have to debit entries one per 10,000, 100 and we have one.

So I’m sure you’re enjoying listening to a debits and credits and learning how this works, but it’s something that’s important for you to learn just to graphs the basics of these concepts. So if you’re Jacksonville CPA is not focused on educating you and your business, then please schedule a free consultation with the Neva

credit entry for $3,000. And remember in any account if the debit is a positive, the credits and negative or have to credit the positive, the debit, the negative. So they offset each other. So we have 18 on the left we have $3,000 on the right and whichever side has the larger amount, will have the remaining or left overbalance. Notice we have 18 on the left we had 3000 on the right we have a $15,000 debit balance. Another example, notice in this example we have a $10,000 debit and we have two credits which total $11,000. So 11 on the right, 10,000 on the left we have a $1,000 remaining credit balance. Okay. So again, whichever side has more will get the remaining balances. They offset you, offset your debits and credits in any account. Okay? This is in your book and if ever there was something which warranted making flashcards for memorization purposes and study purposes. These next two slides are it okay, you got to memorize this. Then there’s no theory, there’s no technical or complex reason why we have to do it this way. It’s simply how the system works. This system was created over 600 years ago by a Franciscan monk, believe it or not, and this system of double entry accounting debits equally.

So there you have it. You have us a Franciscan, not to blame for the accounting system that we use created over 600 years ago, but it works. It just need to understand it. So if you’re Jacksonville CPA is not focused on helping you understand what you need to understand or to run and grow your business, then please schedule a free consultation with Mineva or just give us a call

when credits still works to this very day and is used all over the world. Okay? The system works. Notice, let’s take a look at our assets first in any asset account, whether it’s cash supplies, accounts receivable, land building, equipment, etc. A debit to those accounts to any asset account isn’t increase and a credit, therefore the decrease, so we say assets have a normal debit balance. OkAy, I’m going to put it on the board since I don’t specifically have a slide for this and it’s worth writing down the normal balance for any account is the side left or right debit or credit is the side where we put an increase to that account. It’s also where we show the current balance. Okay? The normal balance for any account is the side could be debit or credit where we show an increase in value to that account and it’s also where we show whatever the current balances after any given transaction. An easy way to remember it is important to me. Wherever you.

If your jacksonville cpa is not helping you grow your business and it’s just focused on running compliance work, then please schedule a free consultation with a neighbor.

You see a plus sign. That’s the normal balance for that account. All asset accounts have a normal debit balance. All liability accounts have a normal credit balance and all stockholders equity accounts, which right now we only have two common stock and retained earnings. Equity accounts have a normal credit balance. Okay, so assets we did was we increased with the debit and we decreased with the credit liabilities, increase with a credit decrease with a debit and stockholders’ equity accounts increased with a credit decrease with a debit. Again, don’t look for any philosophical meaning here. there isn’t any. You simply have to memorize this, so just keep repeating it to yourself until it’s ingrained in your mind. Okay? I’m going to head back to the computer. Okay. Now, using the expanded accounting equation, under stockholders’ equity, we also have to analyze revenues, expenses, and dividends. Now, my slide does not include dividends, but we will talk about expenses.

Notice when we record an expense and write this down, commit this to memory. Whenever we have an expense, whenever we incur an expense, we debit the expense. Rarely do we ever credit an expense account. We do in what’s called the closing journal entries, which we’ll see in a future lecture, but whenever we incur an expense, we debit the expense account revenue whenever we earn revenue, when we record revenue, because we provided a service to our customers, we always credit revenue. We rarely debit revenue accepting closing entries, but we’re not at the closing entry point now. Okay, so don’t even worry about closing entries. Whenever we earn revenue, we prOvide work for somebody or service. We credit the revenue account. Okay, and I’m going to go back to the board here for a moment. The dividend account, which was part of the stockholder’s equity, has a normal debit balance. Commit these to memory Jacksonville CPA.