Debits and Credits Explained in Song

I do not enjoy the music and arrangement of this, I feel it tries to hard to make accounting interesting, but it does get the point across and if people find it useful then I guess it works.

When in doubt regarding journal entries…

One of my instructors (and now friend), shared a nugget of information with our class back in second year that was one of my post-secondary lightbulb moments. You know those moments when someone says something or you figure something out, and the world around you gets brighter and shinier? Well back to the moment, he told us that when we are in doubt look at the journal entries and think about which financial statement they will affect. The majority of JEs will have one line affect the income statement and the other line affect the balance sheet.

Test it out for yourself.

DR Cash $100
CR Revenues. $100

Cash is a balance sheet account and revenues is an income statement account.

With compound entries, you’ll need to separate it out in your head but it’s all the same still.

DR Cash $100
DR Cost of Goods Sold $150
CR Revenues $100
CR Inventory $150

I know there will be the odd transaction that won’t (especially when dealing with manufacturing and inventory) but for the most part it is correct.