MYOB Training

When you start your own business, there are so many things to learn and a whole new way of doing things that you need to get used to. It can be both intimidating and overwhelming, and at times you can feel like you're being required to learn a whole new language. In a way, this is exactly what you need to do. The world of business is full of terms you won;t have come across before, or words that mean something different than what they do in day to day life. Nowhere is this more evident than in the world of accounting, which is why it can take some getting used to. If you're using accounting software there are usually some courses you can do, such as MYOB training , which will help you get used to accounting jargon and practices. In the meantime, this article provides some useful tips to understanding one of the first (and initially confusing) concepts in basic accounting: Debits and Credits.

Un-learning definitions

The first thing most novice small business-owners think when they see the words 'debit' and 'credit' is "Great! I know about debits and credits---they appear on my bank statement!" Unfortunately, accounting terminology defines the words differently. According to Money Instructor.com, in accounting, "Debits are a component of an accounting transaction that will increase assets and decrease liabilities and equity.  Credits are a component of an accounting transaction that will increase liabilities and equity and decrease assets." 

In other words, accounting uses a system which records an increase in liability (like a bill or an invoice) as credits, and an increase in assets (like a new computer or property) as debit. Both are recorded, however, so that you can see exactly how your money flows in and out of assets. It's kind of like the accounting equivalent of the 'what comes up must come down' theory--you record both the ups and the downs side by side.

A Practical example

If I have a mortgage on my house, my house is an asset and the loan for the house is a liability. When I make a payment on that loan, the payment has two parts, a debit and a credit. The payment will increase the amount of my home that I actually own, and decrease the value of the loan. The increase in asset value is a debit to the asset account entitled “HOUSE” and the decrease in liability value is a credit to the liability account entitled “MORTGAGE”.

By now you hopefully have a better grasp of the meaning of debits and credits in accounting. It is still confusing to get your head around, and that's OK--it takes time and practise to learn any language, especially the language of accounting. Taking an MYOB course  or spending some time getting your accountant to explain things to you will help you move quickly through the first stages of learning, and soon you'll be fluent in business!