I. Borrowing and Crediting Accounting Method
Debt-credit accounting is a stumbling block in understanding accounting. To understand accounting, we must first understand what is debit-credit accounting. The method of debit and credit accounting was introduced from Japan by Mr. Xie Linlao in the period of the Republic of China. Japan's debts and loans are similar to those of Debate and Credit in English. But in the future, our debts and loans will have a meaning. They are synonyms. Therefore, this hinders our understanding of accounting correctly.
Accounting is not a matter of dealing with debits and credits, but of dealing with the increase or decrease of individual accounts. For example, cash deposits, bank loans, fixed property and other accounting items increase or decrease, and then we prepare the statements we need according to the accounts, that is, summary statements.
Many entrepreneurs say that they do not understand accounting entries, accounting books and accounting statements. For example, to purchase one million yuan of raw materials, the current practice of accounting is to borrow one million yuan of raw materials and to lend one million yuan to banks. I think people who have not been trained in accounting profession probably don't know what this means, because what borrowing and lending ultimately represent is very vague in itself, and they have not dealt with the problem of increase or decrease.
Various Account Structures under the Law of Debit and Credit Accounting
Many people can't read the books. For example, many debtors and creditors at both ends of accounts receivable do not understand what this means, but suppose that the debtors on the accounts receivable are changed into additions and the creditors are changed into reductions, I think nobody can understand the accounts receivable. The added amount is the money recovered from the goods sold, and the reduced amount is the money recovered now.
Left and Right Accounting Method
The addition of property is recorded on the left side of the book of accounts, the reduction of property is recorded on the right side of the book, the addition of liabilities and equity ratios is recorded on the right side of the book, and the reduction is recorded on the left side, so it is much clearer.
But such a grand invention was swept out of the historical arena in 1993's "two systems" innovation, and the method of accounting began to use the debit and credit method of accounting. I think the practical problem is that the increase-minus accounting method does not connect the debit-credit accounting method very well. The balance rule of the add-minus accounting method is to add and subtract on the one hand, and to the left and right are the same accounting symbols, so it can not be completely shared with the debit-credit accounting method. Left and right accounting method is completely common with debit and credit accounting method, which can completely change debit and credit into left and right.
Just now I talked about the basic problem that left-right accounting does not deal with, but one day I suddenly found that our hands and the rules of bookkeeping are very common. Later I named this rule as the left-right law of bookkeeping. The idea of name comes from the left-right law of physics.
There is a corresponding equation in accounting. Property = Liabilities + all rights and interests. The left-hand rule I just mentioned is to let it act as a property account and the right-hand as an account of liabilities and all rights and interests. When our palm is up, we can find that the left thumb is on its left, the little thumb is on its right, the right thumb is on its right, the little thumb is on its left, the big thumb is on its left, and the small thumb is on its cut.
For example, accounts receivable is attributed to property, which is managed by the left hand, and the thumb is bigger than the thumb. The thumb is the thumb side, which is recorded on the left side. Comparing small thumb to small thumb means reduction. The reduction of accounts receivable is recorded on the right thumb of the left hand, that is, on the right, which is very intuitive. In this way, our hands naturally represent a method of accounting, which I call the left-right hand rule.
3. Left and Right Increase or Decrease Accounting Method
Later, the left-right hand rule was extended to the left-right increase or decrease accounting method. Separating the right from the left, dealing with the direction, dealing with the increase and decrease, also dealing with the source of accounting. In this way, we can completely abandon the debit-credit accounting method, because it is 100% the same as the debit-credit accounting method.
Let's take another entry as an example. This time we think about VAT. For example, we purchase 1 million yuan of raw materials, borrow 1 million yuan of raw materials, then pay taxes, value-added tax, input tax, and credit bank deposits of 117 million yuan. Let's use the method of increasing or decreasing accounts to see what we should do.
Left and Right Increase or Decrease Accounting Method Asset Accounts
About the increase or decrease of accounting method should be so said, the left side is to add the original data, reduce the tax payable, the input tax payable for VAT 170,000, the right side is to reduce bank deposits 117,000, I have an increase on the left, a reduction, the increase is the original data 1 million, whether to add the original data 1 million, should pay taxes, VAT 170,000, whether it represents the future can be deducted. On the right is to reduce bank deposits by 1.17 million yuan, or to pay 1.17 million yuan. In practice, this entry is totally equivalent to the method of debit and credit accounting, that is, to change the left into debit and the right into credit.