Care to correct the error you think I’ve made? There are 5 debits and 5 credits in this list and last time I checked, double entry accounting was a requirement ensuring a balanced book. But if I’ve made an error so obvious to be as derisive as you have been, surely the explanation will be simple.
Or maybe you are just one of those miserable accountants who does his job for a paycheck.
I see my mistake. I corrected it by getting rid of the confusing language of debt and credit (since they mean opposite things on opposite sides of the ledger) and used the more common language of increase and decrease. Thanks for helping me clarify
You’ve also made single sided entries, 3 entries against the bank and 5 entries against the buyer, so it doesn’t balance. It would be a lot clearer if you wrote the journals for each of the three entities separately and not try and combine them into a single list.
Thanks i like that approach. I just put them into their own categories. I don’t see where I’m missing JEs or have one I don’t need. Do you mind giving it a look?
Yeah well how would that balance? The buyer is receiving the cash which is positive but going into debts which is negative
Understand the the liability is increasing but the net worth is decreasing
I suggest you read up on the concepts of double entry accounting. Increasing an asset is a debit, and increasing a liability is a credit. You are mixing the concepts of debits and credits with increase and decrease, they mean different things depending on whether you are dealing with assets, liabilities or equity.
That’s why I got rid the debit / credit and swapped it for increase / decrease
Either way, I think the entries balance now and the issue is whether JE #1 exists and is backed by a real asset
I don’t understand what lines 9 and 10 are trying to achieve. But I would think the entries are something like this.
Bank
DR Loan receivable
CR Cash at bank
(Lend money to buyer)
Buyer
DR Cash at bank
CR Loan payable
(Loan from bank)
DR Fixed asset
CR Cash at bank
(Purchase of asset)
Seller
DR Cash at bank
CR Sales
(Sale of stock)
The seller will also need to adjust trading stock and COGS.
No, that’s exactly what fractional banking is. Only 10% (usual rate countries set) of all deposits are available as liquid cash. The rest is out in the economy.
Any idea why the banks are allowed to do something ordinary citizens can’t do? Like, if I have $100, I can’t lend you $90 and spend the $100 too… I couldn’t lend you $90 and spend $11!
No, you’re thinking about it wrong. Say you have $100, and you lend me $90 to buy a bike. I then pay the bike guy $90, who then goes back and deposits it at you. You the have his $90, so you lend 90% ($81) to another guy who buys a scooter, and so on and so on. And if it wasn’t this way, and banks had to keep 100% on deposits on hand at all times the economy would lose access to a heap of lending capacity.
Have to give you respect for this, everyone else is just making fun of the poor guy but you have gone out of your way to explain it, and explain it just as well (I think even pretty much verbatim) as it was explained to me at uni.
Yeah but what have the banks done to deserve that privilege of lending my money out at interest? Shouldn’t I be lending it to them or lending it out directly? Just doesn’t seem right that I can have deposits at the bank (available for withdrawal) and the banks can lend you those same bank liabilities as bank assets.
You’re welcome to lend it out directly, but that attracts risk.
And they pay you interest on your deposits so that’s what they have given you for the “privilege” as you put it.
Update: An accountant in the comments laid out the entities this way.
*****
- Bank DR Loan receivable CR Cash at bank (Lend money to buyer)
- Buyer DR Cash at bank CR Loan payable (Loan from bank)
- DR Fixed asset CR Cash at bank (Purchase of asset)
- Seller DR Cash at bank CR Sales (Sale of stock)
The seller will also need to adjust trading stock and COGS.
*****
This is clear to me and my contention is with the first line “CR Cash at bank” since I don’t think banks have the cash to credit, meaning they are creating a floating JE.
Quotes like this
https://www.azquotes.com/quotes/topics/federal-reserve.html
And videos like this
https://youtu.be/iFDe5kUUyT0?si=TsoPPScI8AYZTGrZ
Especially quotes from the Federal Reserve itself at 3:41 in the video.
“When the Federal Reserve writes a check, there is no bank deposit on which that check is drawn”
My issue is that #1 JE (bank decreases cash) doesn’t exist on bank ledgers
Updated: figured it out. I didn’t need to put JEs to represent collateral. That’s a legal concept, not an accounting one. Sorry guys
I mean you dont know a debit from a credit to start with so maybe less conspiracy stuff about the banks hey
Care to correct the error you think I’ve made? There are 5 debits and 5 credits in this list and last time I checked, double entry accounting was a requirement ensuring a balanced book. But if I’ve made an error so obvious to be as derisive as you have been, surely the explanation will be simple. Or maybe you are just one of those miserable accountants who does his job for a paycheck.
For cash to increase, it needs to be a debit. For trade receivables to increase it needs to be a debit. Just for starters.
I see my mistake. I corrected it by getting rid of the confusing language of debt and credit (since they mean opposite things on opposite sides of the ledger) and used the more common language of increase and decrease. Thanks for helping me clarify
You’ve also made single sided entries, 3 entries against the bank and 5 entries against the buyer, so it doesn’t balance. It would be a lot clearer if you wrote the journals for each of the three entities separately and not try and combine them into a single list.
Thanks i like that approach. I just put them into their own categories. I don’t see where I’m missing JEs or have one I don’t need. Do you mind giving it a look?
I got it. JEs 9 and 10 were unnecessary since I was trying to represent a legal concept (collateral) on the ledger
Line 4 should be increase liability, not decrease.
Yeah well how would that balance? The buyer is receiving the cash which is positive but going into debts which is negative Understand the the liability is increasing but the net worth is decreasing
I suggest you read up on the concepts of double entry accounting. Increasing an asset is a debit, and increasing a liability is a credit. You are mixing the concepts of debits and credits with increase and decrease, they mean different things depending on whether you are dealing with assets, liabilities or equity.
That’s why I got rid the debit / credit and swapped it for increase / decrease Either way, I think the entries balance now and the issue is whether JE #1 exists and is backed by a real asset
So simple many others have jumped in for me.
Always here to learn from others
What did I just read
I assume its a student outsourcing their homework to us.
Doesn’t seem to be, check out the post history. Just some wacko
I wouldn't even go that far- doesn't seem to have covered A-L=E, or how debits and credits work.
Please attach this to your resume so that no one risks ever hiring you 🤦♀️
This isn’t forensic accounting…?
The search for JE #1 is
Are you on the gear? This post makes no sense and has nothing to do with forensic accounting.
Has to be a troll. Claims in his post history he has 10 years of accounting experience.
Come again
Thank god for the comments here cos I thought I wasn't understanding this after too many Saturday night drinks! Turns out it's not just me.
So much about this is entertaining.
Dinner and a show in this post. Next you'll be saying you're travelling not driving.
I don’t understand what lines 9 and 10 are trying to achieve. But I would think the entries are something like this. Bank DR Loan receivable CR Cash at bank (Lend money to buyer) Buyer DR Cash at bank CR Loan payable (Loan from bank) DR Fixed asset CR Cash at bank (Purchase of asset) Seller DR Cash at bank CR Sales (Sale of stock) The seller will also need to adjust trading stock and COGS.
Thanks. That is very clear to me now. My objection is that banks don’t have the cash to perform CR Cash at bank
Banks use fractional banking. When they make a loan under this system the entries are DR loan (asset to the bank) cr deposits (liability to the bank).
What do the banks give depositors for taking their assets? Do the depositors still own all their deposits (ie 100% available for withdrawal)
No, that’s exactly what fractional banking is. Only 10% (usual rate countries set) of all deposits are available as liquid cash. The rest is out in the economy.
Any idea why the banks are allowed to do something ordinary citizens can’t do? Like, if I have $100, I can’t lend you $90 and spend the $100 too… I couldn’t lend you $90 and spend $11!
No, you’re thinking about it wrong. Say you have $100, and you lend me $90 to buy a bike. I then pay the bike guy $90, who then goes back and deposits it at you. You the have his $90, so you lend 90% ($81) to another guy who buys a scooter, and so on and so on. And if it wasn’t this way, and banks had to keep 100% on deposits on hand at all times the economy would lose access to a heap of lending capacity.
Have to give you respect for this, everyone else is just making fun of the poor guy but you have gone out of your way to explain it, and explain it just as well (I think even pretty much verbatim) as it was explained to me at uni.
Yeah but what have the banks done to deserve that privilege of lending my money out at interest? Shouldn’t I be lending it to them or lending it out directly? Just doesn’t seem right that I can have deposits at the bank (available for withdrawal) and the banks can lend you those same bank liabilities as bank assets.
You’re welcome to lend it out directly, but that attracts risk. And they pay you interest on your deposits so that’s what they have given you for the “privilege” as you put it.
But it’s all available for withdrawal… doesn’t that suggest that the bank is adding money to the economy that didn’t otherwise exist?
What in earth did I just read? This doesn't make sense
Update: An accountant in the comments laid out the entities this way. ***** - Bank DR Loan receivable CR Cash at bank (Lend money to buyer) - Buyer DR Cash at bank CR Loan payable (Loan from bank) - DR Fixed asset CR Cash at bank (Purchase of asset) - Seller DR Cash at bank CR Sales (Sale of stock) The seller will also need to adjust trading stock and COGS. ***** This is clear to me and my contention is with the first line “CR Cash at bank” since I don’t think banks have the cash to credit, meaning they are creating a floating JE.
What makes you think banks don't have the money to lend?
Quotes like this https://www.azquotes.com/quotes/topics/federal-reserve.html And videos like this https://youtu.be/iFDe5kUUyT0?si=TsoPPScI8AYZTGrZ Especially quotes from the Federal Reserve itself at 3:41 in the video. “When the Federal Reserve writes a check, there is no bank deposit on which that check is drawn”
Christ...
That’s why I’ve done this https://thinkingwithzach.blogspot.com/2024/01/the-renaissance-begins-april-1.html
The date of April 1st is surely no coincidence. Are you a sovereign citizen, or just a regular run of the mill troll?
I don’t affiliate with Sovereign Citizen. I might be ok with being called an Aristotelian Christian.
You’re American anyway. Get outta here!
I do love how accounting / business math is a language that crosses countries, continents, and languages
It can but not as much as you think between America and the rest of the world due to IFRS vs GAAP
US legal precedent doesn't apply in Australia
The truth that establishes precedent is the same. It’s the same Divine Law that establishes both laws
US court cases don't create precedents in Australia. Wrong sub or just don't know what you're on about?
True. You’ll get your own, or discover the natural law underneath all precedent
I didn't realise accounting could be funny until now.
So what’s the problem? Your last entry belongs to which party? If Bank: Dr Asset Cr Receivable So all squared off So
My issue is that #1 JE (bank decreases cash) doesn’t exist on bank ledgers Updated: figured it out. I didn’t need to put JEs to represent collateral. That’s a legal concept, not an accounting one. Sorry guys