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PostPosted: Tue May 11, 2010 7:24 am 
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Hi all. I am currently studying a Book keeping course and I have been introduced to the PEARLS system half way through and since then I have had nothing but problems. I understand the whole increase of purchase is a debit and increase a credit... but I can't get it to work in the Sales Ledger.

If Mrs B Smith spends £138 in my store then that is an increase in the Asset of cash putting it on the Debit side of her individual T account (that's what the course tells me) but surely it is an increase in Revenue so it should be on the Credit side?

I just don't get how you are meant to decide whether it is an asset or revenue!? PLEASE HELP BEFORE I LOSE MY MIND!!!!

Dollie x


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PostPosted: Wed May 26, 2010 8:35 pm 
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Let's look at it this way. Debits show us what we have and Credits show us where it came from. The Debit is the money in the bank. That is what we have. So we Debit our Bank account. Where did the money come from? It came from Sales, so we will Credit the Revenue side.

You need to look at the type of account you are working with. Debits Increase Debit Accounts. (Assets, Costs and Expenses) Credits Increase Credit Accounts. (Liabilities, Equity and Revenue)


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PostPosted: Thu May 27, 2010 8:14 am 
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I'm finding this really difficult to get my head around at the moment as it would seem my course is one of a kind and not in a good way. It's not very well explained and I have literally been given PEARLS to work with so I don't know what you mean by debit and credit accounts. Thank you for replying though. I hope I can get this sorted!! :cry:
Dollie x


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PostPosted: Thu May 27, 2010 9:01 am 
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P.E.A.R.L.S:

All Transactions affect two Nominal Accounts. This is achieved by making a Debit entry to one Nominal account and then making a Credit entry to another Nominal account.

To proceed you need to identify which Nominal account to Debit and which Nominal account to Credit. An aid in deciding which account to debit and which account to credit is to use the PEARLS rule:

* Purchases
* Expences
* Assets

To increase Purchases, Expences, and Asset accounts you Debit them, and to decrease these accounts you would credit them. (THIS IS WHAT WE HAVE)

* Revenue (Sales)
* Liabilities
* Source of Funds (Capital)

To increase Revenue, Liabilites, and Source of Funds accounts you credit them, and to decrease these accounts you would debit them. (THIS IS WHERE IT CAME FROM)

The transaction would be recorded in the Nominal Ledger which can represented in a T shape. Debits appear on the left side of the T and Credits appear on the right side of the T, with the name of the Nominal account or the Nominal account code between them.


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PostPosted: Tue Jun 01, 2010 6:13 am 
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Thank you for replying. I really appreciate it and although I sort of get what you are saying I think I need to raise my issues with head office at college.

It seems that my course is teaching me in a very different way to how other people have been taught and my way is certainly not the best!

I've spent enough time trying to sort it out myself but now I'm going to pass the buck and insist that they go through it with me properly and suggest that perhaps their course is a bit pants.

Thank you again

Dollie x


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