Debits/Credits  per    A. L. I. C. E.        0009-01    ZZhlp

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     TO:  Interested Ministries                                                                                                FROM: Jim Bramer, Retired CPA-Auditor
                                                                                                                                                    FILE:  0009-01/hlp

     RE:  Debits/Credits  per   A. L. I. C. E.                                                                            Originated in July 1982                                

        For those of us that are not intimately involved in accounting, the following lady  (A.L.I.C.E.  =  Assets; Liabilities; Income; Capital; Expense )  might help you to better understand the inter-relationships of debits/credits in giving effect to a variety of financial transactions.       

        The emphasize below is "Double Entry" bookkeeping or accounting.  Or this type of financial record keeping means that every transaction has two sides to it.  For example, when you write a check,  the money comes out of your Bank Account plus it is can be an Expenditure or you pay off some type of Obligation.  Also please digest the "Two Sides of the same Coin" content at   0094. 

                                                                          .....The A.L.I.C.E. FORMULA .....

IF YOU WANT TO:

   ENTER AS A:

Usual Bal is a:

Increase

Decrease

  Debit

  Credit

Debit

Credit

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

(A)

Assets

   <- - - - - - - - - - - - - ->

Debit

   <- - - - - - - - - - - - - ->

(L)

Liabilities

  <- - - - - - - - - - - - - - - - - - - - - >

Credit

  < - - - - - - - >

(I)

Income

  < - - - - - - - - - - - - - - - - - - - - ->

Credit

  < - - - - - - - >

(C)

Capital

  < - - - - - - - - - - - - - - - - - - - - ->

Credit

Equity/Fund Bal

  < - - - - - - - >

(E)

Expenses

    < - - - - - - - - - - - - - >

Debit

    < - - - - - - - - - - - - - >

        It seems best to emphasize the increase and decrease aspects of transactions since the terms ‘debit’ and ‘credit’ can lead to misunderstanding.   Following the A.L.I.C.E. formula above; let's say you wanted to complete these double entry bookkeeping entries ---

1>    For a deposit of $1,000 of Donations Income (I) to the Bank (A); you would increase the (A) with a debit of $ 1,000 and increase the (I) with a credit for the same amount.

2>    Purchase of $100 of supplies via your Credit Card would result in: Increase of (E) as a debit of $ 100 and an increase in what you owe (L) as a credit for the same amount.

3>    Payment of that $100 on your Credit Card would go like this: Decrease your (L) via a debit of $100 and a Decrease in your Bank (A) as a credit for the same amount.

4>    Payment of $500 for a chair with a check goes like this: Decrease your Bank (A) by a credit of $500 and Increase your Furniture Account (A) as a debit for $500.

     Please give this lady A.L.I.C.E honor and respect  ---- she is foundational to finance reporting and "accountability" issues.

    Oh, by the way, those of you who use Quickbooks (QB) could benefit along these same lines by going to  0629  and discovering how they attempt to account for "increase or decrease" of transactions in a "non-debit/credit" fashion, etc. 
   

      .  The bulk of this Publication originated in July 1982 and was. UPTD: May 27, 2008

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