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Double Entry Book Keeping - CBE ATT

Struggling to Get Head Around it

Didn't find your answer?

Please be kind. Anonymous for a good reason 

I have been in tax a long time (too long) and have decided, due to a change in personal circumstances (divorce) that I need to go for my ATT to obtain a livable salary.  I am really struggling with the double entry part and I would really appreciate any tips or advice in how to get the rules to stick in my ancient head.  I know about DEAD CLIC and what goes where on balance sheets etc etc but struggle with the questions.

Thanks

Edit:  I already work in practice but purely on the tax planning side of things.  I won't be using double entry post exams as that is not part of my job. There is a department that prepares the accounts for me to do the tax planning for.  I get the debit and credit sides but struggle when put into a story.  I guess I am not confident with it so question my logic.

Replies (23)

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By johngroganjga
24th Oct 2019 13:40

Debits are assets or expenses.

Credits are liabilities or income.

Everything else follows from that.

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By bernard michael
24th Oct 2019 13:47

I was always taught that Debit is the side nearest the window

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Replying to bernard michael:
Bramble
By Chris.Mann
24th Oct 2019 14:15

Has always depended on where you sat, in the room!

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By GW
24th Oct 2019 14:03

The fundamental idea: when you buy an item you have more of something and less of something else - if you buy stock you have more stock and less cash.

Money in Debit bank, credit where it came from
Money out Credit Bank, debit where it went.

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By Accountant A
24th Oct 2019 14:13

If you want to improve your accounting, I would have thought AAT was the way to go. You only "get" accounting by doing it repeatedly.

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Replying to Accountant A:
Bramble
By Chris.Mann
24th Oct 2019 14:17

Yes, there's a certain Eureka moment, when all fits into place.

And then, breathe

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Caroline
By accountantccole
24th Oct 2019 14:52

I heard someone teach it as giving (CR) and receiving (DR) value.
* Make a sale
You receive money for that sale DR
The sale is the giving of value CR
* Make a purchase
You receive a good/service DR
You give money CR
* If you buy something on credit
You receive a good/service DR
You give away a promise to make a payment (trade creditor) CR
* When it is paid off
You receive the promise back DR
You give away cash CR
It has sort of worked when training others
Practice practice practice is the only other advice

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By Payrollgal
24th Oct 2019 15:15

This probably won't help but it is literally the only thing I can remember from doing AAT a long time ago and that was how to remember which way round debits (dr) and credits (cr) went.

(Dr)ive on the left and (Cr)ash on the right.

This obviously wouldn't serve you well internationally but works alright in the UK!

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Replying to Payrollgal:
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By bernard michael
24th Oct 2019 15:22

Quote:

This probably won't help but it is literally the only thing I can remember from doing AAT a long time ago and that was how to remember which way round debits (dr) and credits (cr) went.

(Dr)ive on the left and (Cr)ash on the right.

This obviously wouldn't serve you well internationally but works alright in the UK!

That explains the Italian accounting system

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Replying to Payrollgal:
Caroline
By accountantccole
24th Oct 2019 16:04

I live in France - it's tourists like you that cause chaos LOL

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By Moonbeam
24th Oct 2019 15:34

Buy yourself Frank Wood 1 Business Accounting. It's a fantastic book with loads of example questions that you can work through to get up to speed with basic bookkeeping.
Once you've got to the end of Frank Wood, join the AAT - their exams are what you need to work through to get a reasonable knowledge of bookkeeping and accounting and current legislation. The ATT concentrate more on tax.
Of course you could do with practical accounting experience with an employer, but maybe you can get away without this with your tax knowledge.

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By eckbookkeeping
24th Oct 2019 15:35

I remember it by PEARLS

Dr
P - Purchases
E -Expenses
A -Assets

CR
R - Revenue (Sales)
L - Liabilities
S - Source of funds (Capital)

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By John R
24th Oct 2019 15:45

and if you are wondering why your bank statements show bankings as credits remember that they are showing the entries in the bank's books, not yours!

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By paul.benny
24th Oct 2019 16:58

#OP - I understand that you want to remain anonymous - all the same it might help us to help you if you can give a bit more of an idea of where you are struggling.

You can (I think) edit the OP without breaking your anonymity - just mark the edits so that we know what's new.

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Hallerud at Easter
By DJKL
24th Oct 2019 17:07

How I learned was a card I carried everywhere, on buses, everywhere, I think it was suggested to us by Professor Weetman though back then she was not a Professor.

Three columns, TYPE, DEBIT,CREDIT

Under Type we had in order Income,Expenses,Asset,Liability,Capital

Alongside Income under Debit column was ""Decrease" under Credit was "Increase"

Alongside Expense under Debit column "Increase" under Credit "Decrease"

And so on.

I found this worked, I never went to the voluntary book keeping classes at Aberdeen as they clashed with the Stats course I had to take (because I had taken economics in my first degree I could not take it and I had to have the total credits to get the PG Cert) but it all worked out fine, 6-8 weeks in and it all slotted into place.

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By Accountant A
24th Oct 2019 18:25

And remember, if your employer says you are a credit to the organisation, that's not a good thing because a liability is a credit.

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By johnhemming
24th Oct 2019 18:39

Although I am not an accountant my first wife was a qualified accountant and I helped her learn by going through the books with her. I also decided it was sensible to teach basic accounting to the computer programmers in the first company I set up.

What I found caused confusion was that people had learnt about bank accounts and that when it was "in debit" they owed money to the bank and when it was "in credit" then they had money in the bank. Because the bank control is the other way round they got confused.

What I found was that it was best to explain that the bank's accounts look at the situation from the perspective of the bank and that when a bank account is in credit then it owes you money, but your own account should be in debit because the bank owes you money and it is an asset. This often took a bit of relearning because people are so used to having bank accounts.

However, then the principles apply that income is a credit because the money is owed to the shareholders or partners in the company by the company and otherwise credits are owed to people who are not owners of the company.

Similarly expenses are a debit because they reduce what the company owes the shareholders or assets or debts are a debit because someone else owes the company something (such as in a sense a physical asset).

The alternative that debits are next to the window has its merit. Often from a software perspective credits are negative numbers.

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By mrme89
24th Oct 2019 19:28

You say you get Dead CLIC but struggle with the questions. What questions do you refer to?

Feel free to PM me if you want to email some questions and I will try my best to explain the answers.

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Accountants & Tax Advisors
By Gladstone
25th Oct 2019 10:33

Trying to learn double entry by short cut is similar to showing disrespect to Luco Pacioli who is considered as the father of double entry bookkeeping or financial accounting or now known as financial reporting. His great mind and thinking changed the world for good (mathematical concept based on LHS=RHS) . I suggest you read, understand and revise the book 'Fundamentals of Accounting' by Frank Woods in a quiet place and I'm sure it will benefit you a lot rather than short-cuts. Good luck!

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By adam.arca
26th Oct 2019 13:26

The OP needs to pass an exam in bookkeeping which will form only a minor part of his tax qualification. He doesn't therefore need to read Wood or become any sort of expert.

There's been some great answers about what debits and credits represent. My tuppenceworth would be this: if you spend money, then you either create an asset or incur an expense, and that's why they're both debits; and obviously the same principle but the opposite effect where you receive money. And if you're spending money, then you're reducing your bank asset, and that's why that side is a credit entry to bank.

More fundamentally even than that, though, is the arithmetical principle that everything must balance. Remember that there must be a matching credit for every debit (accountants "cheat" on that all the time by bundling entries but the principle itself is absolutely basic to bookkeeping) and you won't go too far wrong when you combine that understanding with an understanding of what the debits and credits themselves are doing to the accounts.

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By JoF
26th Oct 2019 13:35

Buy a Kaplan level 2 AAT book on the subject - Kaplan have a ton of examples to work through for DE.

Agree with the others that the basics supplied by AAT would stand you in good stead - you could rattle through the whole course in a few months.

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By penelope pitstop
27th Oct 2019 01:54

The trouble with being immersed in tax is that it is all single entry.

Accountancy is, however, most double entry.

So your brain is probably hard-wired to single entry.

As mentioned above, the more you do double entry, the more it will become ingrained in your mind.

But then if you spend some time doing tax again, your brain will then revert back to single entry.

A young brain does help, and age will be a hindrance.

The only thing I can recommend is as above, get a Frank Woods bookkeeping study book and start ploughing through, or even a bookkeeping course at a local college, which is not as cheap now as it used to be.

By the way, earning £300 for a personal tax return jobby is far easier money than earning £300 for a grubby sole trader gardener who cannot be bothered keeping any records.

And a grubby sole trader gardener will be far easier money than a sole trader builder acting as contractor and subcontractor who cannot be bothered keeping any records nor be bothered with the construction industry tax deduction scheme.

You have been warned!

Alternatively, get a job working for a firm of accountants in the accounts department as a junior/trainee. I would reckon that three months of intensive bookkeeping at trainee level would be invaluable.

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Replying to penelope pitstop:
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By johnhemming
27th Oct 2019 08:49

Quote:

The trouble with being immersed in tax is that it is all single entry.


Which is where the challenge comes in doing tax calculations on a cash basis, but producing accounts on an accruals basis which is quite a an odd thing.
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