You're a life saver. I have missed my accounting classes bc of some registration issues and I'm a first year, first sem student, I thought I would never get what they're talking about but now I do thanks to your yt channel.
Grayham, I'm so happy that you were able to catch-up to the class with these videos. I'm in the process of uploading all my videos to the new website. My financial accounting class is complete. If you need any more help, be sure to visit edspira.com/courses/financial-accounting. It's a lot easier to navigate compared to the RU-vid channel. Happy studies!
Anyone who just started learning accounting should definitely watch this video! Debits and credits is such a fundamental topic and your explanation as it meaning 'right' and 'left' makes much more sense than 'increase' and 'decrease'. This video is a must-watch for all accounting students who struggle with this concept.
"The equity in the firm is increasing when we make sales. So we can think of that also as a credit because we're increasing stockholder's equity and thus will increase with a credit." This makes perfect sense to me. However, it seems the exact opposite argument could be made by replacing a few choice words: "The CASH in the firm is increasing when we make sales. So we can think of that also as a DEBIT because we're increasing ASSETS and thus will increase with a DEBIT." Please help me understand where my logic is flawed. I don't want to ever accidentally use reverse reasoning. P.S. Thank you soooooooooo much for all these wonderful free videos. You are so awesome and amazing!
Brilliant explanation, the only thing I don't understand is, Surely dividend payouts will reduce assets, yet you stated it would increase debits which in turn increases assets? Im confused
dividend payouts will reduce cash (asset) which means cash will be credited (since a decrease in asset leads to asset getting credited). But, dividends payout will reduce SE (which is a credit account) as you will taking a % out of the retained earnings to pay to shareholders thus a reduction of a credit account will lead to the account being debited (since an increase in equity account means it gets credited)
This one --almost-- makes sense! I always thought it was: money --in-- credit.....money --out-- debit. I can kind of understand the dividend idea....it is a --debit-- to the company making the dividend....because it is money going --out-- to them....but....it is a --credit-- to the individual getting the money...because it is money coming --in-- to them. I cannot understand how increasing an asset is a -debit-.....increasing an asset is money coming --in--. Again....money coming in is a --credit--. It is like a credit card... you are telling the credit card company....let me have this now....I will pay you later. When you first put money into your account.. that is a --credit--. when the company actually --takes-- the money....the account is debited. It is like the debit card.... money is taken --out-- of the account....money --out-- that is a debit. It is like when you pay a bill....your account is --credited-- the payment...but when the utility or whatever actually -takes- the money....the account is debited...the -amount you owe- goes --down-- I guess I will have to remain confused. Does this make sense to anyone? asammar6@yahoo.com
Maybe just let go of the money in and money out idea and focus on the equation the way the video says to. Every time money comes in or go out, there are both debits and credits that happen. The money in on a sale is in the revenue account, sales or income and is credited. Your checking account, if it was a cash sale, gets debited.. See, money came in and it was recorded as both a debit and a credit. So your money in and out thing doesn't work.
Hopefully these videos help you. Stick with it! Accounting is a difficult topic for many people to learn, but you'll have a day when it all comes together and makes sense.
Sir,,, I am Sharique from India presently doing my bachelor's in management and I do have a subject of financial accounting,,,, so plz guide me through your process of teaching, i.e where can i get the entire tutorials of course in arranged sequence
Sorry if I sound like a suck-up but you really explain things well. Even though I understood it last year, your explanation is still very fluent and helpful.
I use a Wacom Baboo Tablet to write, SmoothDraw as the main software, and Camtasia to do the screen casting. Glad you liked the videos! I have 144 financial accounting videos on my website if you need any additional help with your studies. All the content is free. edspira.com/courses/financial-accounting Thanks for watching!
Buying assets increase stockholders equity too, right. Let's say I get an asset on credit for short period. For that period, equity has increased so shouldn't asset be Credited on increase since you said what increase equity is credited
No because an asset has a normal balance on the debit side. Say stock is issued to the owners, then cash is debited because the stocks were sold and common stock is credited because it increases stockholder’s equity
Sale increase the equity and increase asset as well. Expense decrease asset and decrease equity as well. Accounting alway do not have logic. Just lost money debits, gain money credit. What a simple way. Why mix up on irrelevant thing on purpose to increase the difficulty of accounting.
He gave you one thing to focus on and is going to get to your concern in the T account video. Don't worry about what it does to the asset account, when determining if a credit or debit increases the account. Only focus on what it does to equity. A sale, increases equity. So it's a credit. Whenever you credit an account, you must also debit another account. If you sold something, you now have a new asset. It's either a cash account or it's an accounts receivable account, that will increase.. One of them will need to be debited. If your sale was something you held in inventory, you will also debit an expense account, cost of goods sold, and credit an asset account, inventory.
@@sunshinehellohuddle Just practice man find a good resource book/material which gives good amount examples Just remember the three golden rules {Real accounts(Cash ,bank ,fixed assets , ..):DEBIT WHAT COMES IN AND CREDIT WHAT GOES OUT, so for example you purchase a furniture which is a fixed asset (Real Account) and you pay cash which is current asset(Real Account) so what is the rule (debit in credit out)so figure out what is going out and what is coming in The next is Nominal account where the rule is DEBIT THE RECIEVER, CREDIT THE GIVER. Basically for Nominal account the simplest rule would be {Debit all expenses and losses and credit all income and gains.}This rule is mainly used in final accounts like Trading, Profit&Loss accounts where purchase is considered an expense and we put it in the debit side and Sales and revenue items are(well revenue items) and should be placed in the credit side. The last account is Personnel Account, it's rule would be (DEBIT THE RECIVER ,CREDIT THE GIVER) This rule is very similar to Cash account and it's when you have to deal with credit accounts so for example: If you made a credit sale(That is :Sale where there was no cash exchange but a promise to pay cash later. ) You will do the same as you do for cash but instead of cash you write the debtor's name/company . I hope this explains to you the basic concept of accounting, but as I said before, FIND A GOOD RESOURCE BOOK WHICH GIVES A SUFFICEIENT /GREAT AMOUNT EXAMPLES AND PRACTICE IT ."PRACTICE MAKES A MAN PERFECT".I hope this helps ,
I already had all the debits and credits memorized but for the first time I UNDERSTAND it. Thank you so much!!!! I almost feel silly for not having understood it sooner.
i graduated with accounting major for nearly five years, to be honest i was just curious how would you explain debit & credit i gotta say this is simply the best explanation i could ever imagined, it connected a lot of dots i was missing & whats the connection between IS & BS etc Thank you
I finally understand!! I watched so many vids and read so much from my textbook but I couldn't grasp it! You are a lifesaver!! Thank you for what you do!!
Debits：(1) things increasing Assets, (2) things decreasing liabilities, (3) things decreasing shareholder's equity. Opposite for Credits. It this understanding correct?
I recommend you teach this by piggy backing on the PRE-EXISTING knowledge of debit cards and credit cards that people already have. That left and right stuff is completely arbitrary, since you can just rearrange the equation. You can't connect a new piece of information to an arbitrary concept and expect it to stick
It is a matter of different teaching styles and yours may not necessarily work well just in all cases.This explanation is not just for persons with pre-existing knowledge but rather a basic and thorough explanation suitable for beginners even before they apply the theory to debit and credit cards.
I absolutely love these videos. I am going for my MPA and this seems to be helping before i even get started. I don't understand some things in the video but i can understand most of it.
I'm glad you find the videos useful! Congratulations on beginning your MPA. I hope your program goes very well and that you're able to land a position where you can make an impact!
Hypothetically, if a company declared and immediately paid a cash dividend of $500, the company would debit Dividends and credit Cash. Then at the end of the period, when the company is closing out temporary accounts, it would credit Dividends (to zero out the account) and debit Retained Earnings.
I have never been so lost. You say assets increase with a credit but assets are on the left, do the opposite to increase a thing but both sides are equal to one another. Somehow equity increases with a debit but its on the credit side. I've been learning accounting for a few weeks now and this video has single-handedly derailed everything I was told before.
That's because in accounting debit means "left" and credit means "right". It's really that simple. Many people want to try and understand the behavior of what's going on in a transaction by assuming that debit and credit correspond with "increase" or "decrease", but this is wrong. Different types of accounts behave differently. For example, an asset increases with a debit but a liability increases with a credit. I hope this helps!
This video helped it click for me that a decrease one side is equal to an increase on the other. Simple arithmetic and obvious in hindsight but for some reason it didn't click until this. Thank you.
@Mohammad Hanifah. Revenue and expense are accounts affecting ONLY the stockholder's equity. They have nothing to do with the asset account. They are a league of their own. The revenue increases the stockholder's equity, while the expense decreases it. Since the stockholder's equity increases with a credit, anything that increases it MUST also INCREASE with a CREDIT. Since revenue increases stockholder's equity, it increases with a credit. And since expense decreases stockholder's equity, it increases with a debit.
I searched so many websites , read so many sources, enrolled in accounting courses but was still confused about how a increase in Asset (which is increase in value of Company's holding) was taken as debit (which actually means entry that is owed or taken out but it's ok I will forget English and assume debit means increase in value) but at the same time the profit from sales ( which is again income for Company or increase in Company inhand wealth) is considered as credit ( which in english means something that is taken as loan and has to be paid back), I learned that combining english, accounting and my commonsense and trying to make logic out of them was a big mistake. This video cleared my doubts and I will stick to this concept and stop thinking and forget everything I know about credit and debit.
I'm learning more from this video series than I've learned from my prof this whole semester, thank you Mr. Khan academy man you're definitely a certified beauty
