Forum

• # 53962
• Fri 21 Jan 2011 04:07 PM

Hi all

I always like to have in my head a good reason why something occurs so that i can remember it better.  For instance it makes perfect sense that assets are debits and creditors are credits and when it comes to the purchases account i class this as something the business owns, however i cannot make much sense of the sales side and why it should be a credit.

I realise that it has to be the opposite to the bank account but i want a proper explanation rather than thats just the way it is.

Does that make sense to anyone??

Ally

• 
  Quote
  

• # 53963
• Fri 21 Jan 2011 04:29 PM

Hi Ally

the other side of the accounting equation from Assets are liabilities which are credits.

When a company or sole trader makes a sale they then have a liability to that customer to supply the goods and services that they have sold.

hope this helps

Stuart

• Forum Moderator, South East & Greater London Regional Chairman
• 
  Quote
  

• # 53993
• Mon 24 Jan 2011 09:41 AM

Hi Stuart

Thank you for your prompt reply and yes that really helps and makes sense now.

Ally

• 
  Quote
  

• # 70122
• Fri 08 Apr 2011 10:30 AM

To further clarify why Sales Account is a credit is because of the fundumental principle of bookkeeping i.e Debit  Assets and Expenses and Credit Income(revenue) and Liabilities. Since a sale is Income it has to be a credit. If you follow this you will not go wrong.

Edited at 08 Apr 2011 10:31 AM GMT

Edited at 08 Apr 2011 10:33 AM GMT

• Sonny

• 
  Quote