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Which Column Is Which?

Each of the accounts is separated into two columns. The left hand column is used to show receipts and the right hand side is used to show payments.

There is a simple rule to explain which side of the account you should list any particular transaction.

Debit - the account that receives the goods, services or money. (The receiver)

Credit - the account that gives goods, services or money. (The giver)

A local business called Sharp Ltd has an account with Pepe. They often have long business meetings and have pizzas delivered. If we look at their account below we can see that on May 10th they purchased pizzas from Pepe on credit. Sharp Ltd is the receiver of goods and the transaction is therefore entered on the debit side.

On June 9th (thirty days later) Sharp Ltd makes a payment for the goods. Sharp Ltd is the giver in this case and so his account is credited.

Account of Sharp Ltd
DR CR
Debit Side Credit Side
Date Details Folio Amount Date Details Folio Amount
May 10 Sharp Ltd Purchase pizzas on credit XYZ 200.00







June 09 Payment made for goods XYZ 200.00

At any given day, week or month the account can be balanced off.


Source:
http://www.bized.co.uk/

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