Reversed entries usually have one of four causes. Finding which one applies saves more time than repeating the rules.
This page explains why the mix-up happens. If you need a routine to use right now, go to I keep reversing debit and credit.
What are the four causes?
Cause 1: the bank statement flip. In daily life, a credit to your bank account means money in, which sounds like “good”. In your own books, a bank balance is an asset, and money in is a debit. The bank is using its own point of view.
Cause 2: memorising per transaction. The student learns “cash sale, debit cash” as a fact. A new transaction has no memorised answer, so the student guesses.
Cause 3: skipping account types. The student jumps straight to sides without deciding whether each account is an asset, expense, income, liability or capital. Sides only make sense after the type.
Cause 4: one-account thinking. The student decides the side for one account, then copies it to the other. Every entry has two accounts on opposite sides.
Worked diagnostic
Try these six original entries. Write debit or credit for each account before opening the answers.
- Owner puts RM5 000 cash into the business.
- Goods returned to a supplier, RM300.
- Wages paid in cash, RM700.
- Customer pays RM400 owed, by cheque.
- Equipment bought on credit, RM3 000.
- Owner takes RM200 cash for own use.
Answers
- Debit cash RM5 000, credit capital RM5 000.
- Debit payables RM300, credit purchases returns RM300.
- Debit wages RM700, credit cash RM700.
- Debit bank RM400, credit receivables RM400.
- Debit equipment RM3 000, credit payables RM3 000.
- Debit drawings RM200, credit cash RM200.
How to read your results
If you missed entry 4 or 6, the bank statement flip or account types are likely causes. If you missed 2, you may be memorising per transaction, because returns reverse an ordinary purchase. If you got the first account right and the second wrong in any entry, suspect one-account thinking.
Write your guess next to the entries you missed. Then repeat a similar entry a day later and see whether the guess holds.
What to do next
For a simple habit, use the four-question routine and ten short entries per day. The debit-credit transaction trainer gives fresh entries each time.
For the textbook treatment of each account type, see deciding debit and credit entries.
When one-to-one tuition may help
If you cannot tell which cause is yours, or the same one returns, a teacher can ask you live questions and listen for the exact point where it happens. Fixing one cause is quicker than revising the whole chapter.
See online one-to-one Accounting tuition for how starting works.