As you know, all accounting is based on postings. Despite the fact that at first glance the posting seems to be something scary, in fact, accounting postings are just the whole accounting reflection of economic transactions. Have you purchased raw materials, repaid a loan or rendered a service to a client? All this should be reflected in accounting. Even the most insignificant operation must be fixed so that the final document characterizing the state of affairs at the enterprise, the balance sheet, can be brought together. At the same time, the whole variety of economic operations in which the company is involved can be divided into four simple groups and, by analogy, carry out accounting. You only need to understand the logic of these four groups to open the veil of secrecy over accounting operations.
The first group is referred to as asset restructuring. Assets - this is what the company owns, for example, cash or production equipment. The moment you spend your money on equipment, you are in the process of restructuring. All typical postings of this group are posted as the debit of the active account, which you increase (in the balance sheet, assets are always taken into account in the debit) and the credit of the account, which you decrease. In our example, an account will be credited in which cash is recorded.
The accounting entries of the second group are similar in principle to those previously considered. Only in this case we are not dealing with assets, but with liabilities. Liabilities include the company's debts, as well as its capital, which can be defined as the share of shareholders in the form of investments and profits. Restructuring of liabilities can occur when you extend the loan repayment term, which means that it is converted from short-term debt to long-term debt. In this case, it is necessary to credit long-term debt (liabilities in the balance sheet are taken into account in the loan), and accordingly, debit short-term.
The third group, unlike the examples discussed above, combines accounting entries that link assets to liabilities. In this case, there is an increase in both. A rather simple example here is the borrowing of funds by an enterprise. In this case, additional funds appear on his account, i.e. the active account is debited, however, the debt of the enterprise to creditors also grows, which means that the corresponding passive account is credited. According to a similar principle, revenue is recorded, only in this case capital is credited.
And finally, the fourth group includes standard accounting entries leading to a decrease in both assets and liabilities. As you might have guessed, this type of posting includes debt repayment and cost accounting. In the first case, we credit an account containing information about cash, while debiting an account that takes into account our debts. In the case of expenses, we need to debit a special account that reflects the cost of production. It will then be used to calculate profits.
Having learned all the accounting entries discussed above, you can easily understand almost any operation performed by your accountant. The main thing - do not forget the general principle: if something is debited, then something should be credited for the same amount. Remember also that asset growth is always reflected in debit, and growth in liabilities is reflected in credit, respectively. Guided only by such superficial knowledge, you can easily navigate in the main accounting documents, which means you will stay up to date with everything that happens at the enterprise, which is so important for making management decisions.