Debit or Credit? Error in Sorting?

I’m currently use Manager 17.4.12 - pretty sure it’s the latest, but downloading it again right now to double check (internet’s very slow at the moment too)

Anyways, just finished catching up on all my finances, invoices, etc, and noticed that my finances relating to Debit and Credit seem to be mixed around.

But then again, maybe it’s my lack of understanding.

From what I understand, Credit is money you have - own - earned, where Debit is money you don’t have - owe - used.

So when I make a sale, I pay for the stock, say $50, and customer pays me $100. So my Debit should be $50, Credit should be $100.
And overall Credit/Debit will be $50 Credit.
And if I purchase more stock, say $75 worth, and no sales yet, then I have a Debit of $75 in the accounts, and overall Credit/Debit will be $25 Debit.

At least, that’s what Credit and Debit means to me, in Australia.
Not sure about the rest of the world.

Or perhaps, in the world of finances, it’s the other way around and this is just one more thing I learn every day. o.O


You completely misunderstand debits and credits. It has nothing to do with where you are. Read the Best Practices Guide on Chart of Accounts for a very brief introduction. Then obtain some education about double-entry accounting.

Thank you Tut, didn’t realise that the financial side of things was a lot more than ‘in’ (credit in my understanding) and ‘out’ (debit in my understanding).

Thought assests, equity, liabilities, income, expenses, were just terms to categorise the type of things coming in and going out, didn’t know credit and debit in actuality are two different types of things with their own ins and outs


Manager is only a tool. Until you know what the tool is supposed to help you do, it won’t make much sense or be very useful.

Well it shouldn’t. Every transaction in the entire world has both a debit & credit. Taking your example:
Buy stock for 50 - Debit Inventory and Credit Cash Account.
Sell stock for 100 - Debit Cash Account and Credit Sales.

That’s because you are reading your bank statement and not your accounts. Money that you own is a credit on the bank statement, because the bank owes you the money and if you spend some money then it appears as a debit on the bank statement as the bank owes you less money.

In your accounts generally - Debit balances represent Assets & Expenses and Credit balances represent Liabilities, Equity and Income.

So to understand how it works then, using your example

Buy stock for 50 - Debit Inventory and Credit Cash Account.
Sell stock for 100 - Debit Cash Account and Credit Sales.[/quote]

So buying stock, there’s a debit in inventory, I’ll see stock there. That 1 up also means that on the credit column, there’s a negative monetary value because I’m using money.
I sell it, now there’s a positive monetary value in the debit column, and a 1 up in the sales made.

Both the monetary values relate to my cash account, so again, to me, looking at it like a bank statement, find it interesting that the terms are flipped around, because we look at it from the bank’s perspective, and not our own. That the money we spent is a credit to the bank, and money we make is a debit to the bank.

In Tut’s article, it said that this equation could be flipped around, but more difficult. I guess my confusion on the matter, 1) being that I’m not an accountant, so this is all new to me, and 2) being that it’s my business, why would I can about the banks perspective? Why not money in is a credit to me and money out is a debit to me?
So I wonder about this ‘flipping the equation around’ thing. Guess got some looking up to do

Also, reading the example of Ravi, I understand how all the finances were filled into their categories of assets, expenses, etc. So technically, when I looking at the summary, I should see positive and negative values in both the debit and credit column then.
If I have understood that correctly, when I look at my summary, all negative monetary values are in my credit column (transaction costs, operating costs, advertising, purchases of stock, etc), and only my positive monetary values are in the debit column, which only consists on the sales invoices, nothing else.
Looking at the main summary page, it shows I have values in every category, but it isn’t reflected as such in the listings.

So this makes me wonder, have I set up the accounts wrong in Manager, or is it just displaying debits and credits from the banks perspective, can I change it to view in my perspective, or is that just the way it is, and the equation is just for us to understand the inner workings if finance?

From Tut’s article, what I get is, part of how this stuff works depends on what the government wants, so, if I remember correctly, when I have to report my business transactions, they only ask for cost, and profit (I’m simplifying of course, but in essence, it really was that simple), a simple form to fill out

I’m operating now as a sole trader, and not business, thus all of the stuff I do is now considered as personal costs to run it and extra income.

So just wondering if Manager could be set up in a way to reflect this, model?

Anyways, going back to the example of Ravi, I’m not sure where the extra 1500 asset has come from, gonna have to go through it again, lol

Anyways, sorry for my lack of better understanding. So much to learn

Let me just say that you still have misconceptions. So many, in fact, that it probably isn’t productive to try to address them one at a time. Before you go further, you need to gain understanding of double-entry accounting, because you are still viewing transactions as single pluses or minuses, like keeping a cheque register. There is much more to it, even in the simplest cases.

Let me suggest spending time at Free, comprehensive, and full of examples. There are also many other good resources on the web, too.

Plunging into accounting without background knowledge, just reading Guides on Manager software, as you are, is like starting with a dictionary and expecting to be able to write a novel. You need to understand much more. But don’t be discouraged. Basic accounting needed for a sole tradership is not difficult to learn, but there aren’t too many shortcuts. Manager makes many things simpler, but only if you understand what the program is accomplishing for you. The Guides focus on how to use Manager, not basic accounting theory.

Thank you Tut, will look into it.

Just one last quick question then, as it may be answered via the link, but think it’ll be easier to resolve this one thing whilst I learn about it all

When I used to work in a business and was updating the catalog prices, the boss would say, take the cost price inc GST, and multiple by 1.21, because the customers need to pay tax if 10%, then well add our 10% profit.

Is this true? Do customers need to pay tax on top of our cost price?

Just so I can alter any current prices I’ve set already, whilst leaning the ins and outs of accounting

I should probably ask my wife… She’s an accountant from her home country, but doesn’t speak much English. Learn it in my mother language can be confusing enough, now to learn it in another… Lol

No, customers need to pay tax on top of your selling price.
Your selling price is the cost price (excluding GST) plus your margin (mark up) then add the tax.
You use the cost price excluding GST as the GST paid by you will be refunded - offset against the GST collected from customers.

That is totally wrong - Cash you own is an asset, assets are debits.
Cash you own is a credit to the bank as they owe you the money - if you like, you have lent them the cash until you want to use it. From the bank’s perspective, owing you that lent cash is a liability - a credit

As a complete beginner myself, I found it easier to always remember that Assets are Debits and Liabilities are Credits.

So when you buy Stock it is an asset and so that Inventory Account is debited. When you owe money it is a liability and so it is a Credit. Think about your Credit Card - it is a liability!!

[quote=“clive”]As a complete beginner myself, I found it easier to always remember that Assets are Debits and Liabilities are Credits.

So when you buy Stock it is an asset and so that Inventory Account is debited. When you owe money it is a liability and so it is a Credit. Think about your Credit Card - it is a liability!![/quote]

Thanks Clive - definitely a nice way of putting it :slight_smile:

[quote=“Brucanna”]No, customers need to pay tax on top of your selling price.
Your selling price is the cost price (excluding GST) plus your margin (mark up) then add the tax.
You use the cost price excluding GST as the GST paid by you will be refunded - offset against the GST collected from customers.[/quote]

I’m still a little confused.

So sorry, one last long post and I think that’ll get me through and out of everyone’s hair for while. :slight_smile:

So let’s put out an example.
I purchase an item for stock, at $50 ex GST. So I should mark up first then right? Let’s put a $25 mark up.
So now it’s $75. Then add tax, so 10% of $75 is $7.5, so total price for the item is $82.50. Let’s say I mark up a little more to make it $84 dollars (I just like working with 4’s and 9’s). So essentially, my mark up is $26.36 ($76.36), and tax paid is $7.64 then, right? Or did I get it wrong?
Reason I ask is because when I purchase stock from my suppliers, they already charge GST on top of the cost (ex GST) price.
So when I pay for the item, I’m already paying $55 inc GST. I then add my mark up of $25, so the price I sell is $80. Am I supposed to still add GST unto this price then before selling to the customer, so final selling price is $89 (I like my 4’s and 9’s)? Or would charging $79 be correct?

Based on the above scenarios, the customer buys the item. How do I work out the tax they paid? Somehow… my maths has completely just left my mind… Is it just 10% or $xx?
So if sold at $79, is the GST they paid just $7.9?
If sold at $84, is GST $8.4?
If sold at $89, is GST $8.9?
Or is it divide by 1.1? My sales invoice in Manager seems to do this (and it includes the GST of both the product and shipping I charged).
If just divided, then is GST $7.18, $7.64, or $8.09, respectively? Using this model, selling at $84, meaning purchasing the item at ex GST cost price and adding it after, seems to correlate with Manager calculations, and effectively, the GST I paid, the the GST the customer pays, cancels out and I nor the government owes anyone anything. Somehow, this doesn’t sound right to me, otherwise I wouldn’t see a reason for some of the people I’ve heard about look for ways to report breakeven to avoid paying any taxes, or then look for things they can claim on.
So, putting it in my situation that GST was already calculated and purchased, then technically, the GST I paid and will get refunded is only $5. The GST paid from the customer is $7.18, or $8.09 respectively. Offsetting it against what I paid, that means I’d owe the government $2.18 or $3.09, respectively.

So now working out my income, putting out a full scenario, let’s say shipping from supplier to me is $9 ex GST. My cost of shipping is also $9 ex GST, and I charge $15 inc GST (get some profit from it).
My cost from the supplier is product + shipping, $50 + $9, $59 ex GST. I am charged tax already, so I pay $64.9 inc GST.
I then sell the product at $79 inc GST, plus shipping of $15 inc GST. So customer pays me $94 inc GST.

So to work out my income, I have to take away the GST that the customer pays (because this is what I’ll owe to the government, right?), the cost of shipping, and cost of the product. The GST that the customer pays would be $8.55 (94 - (94/1.1)), right?
So 94 - 8.55 - 9.9 - 55 = $21.55 only then, right? Because I’m refunded $5 for the tax I paid when purchasing stock, my overall income is $26.55 right?

So I guess the situation is, I want to clarify where am I calculating my GST/tax and profit/income from, so I can revise my current prices and update and correct everything.

Inevitably (unless it’s just always the same), it looks like I’ll always owe the government the GST, since the refund they give me will never be more than what the customer paid, whether it’s straight up 10% or divided by 1.1, then right?
But if I have an expense, like transaction accounting) fees, marketing and promotions, etc, that’s when I can claim back on things and rather than owing the government $3.55 (using the above example of customer GST to me of $8.55 and my GST to supplier of $5), they’ll refund me according to whatever they cover, right?

Again, I apologise for the lengthy post. I think once I’ve covered this, everything else will make sense. When it talks about liabilities, assets, expenses, etc, it’ll make sense since I have a real, complete, example, a reference, I can use.

It’s almost tax time, so just trying to equip myself with the basic maths to at least do this part right for when I put in my taxes, whilst I learn about the other stuff.


Exactly correct.

You get refunded the 5 GST, so the item will still only cost you 50 - you don’t add GST (10%) to the GST paid ($5).

If the GST is 10% and you want to round prices to 4’s and 9’s, then divide the selling price by 11 to calculate the tax : 100 + 10% = 100 + 10 = 110 : 110 divided by 11 equals 10 so 110 - 10 = 100.

So 79 divided by 11 = 7.18 tax.


No, you get refunded 5.90 : 64.90 - 59.00.

That’s good you want to have that understanding but the reason that you use Manager - is so that all those calculations are done properly for you as long as you enter the transactions in correctly in the first place.

Set up a test business and enter your scenarios and see the results - let it be your calculator.

Sorry for the really late reply - just wanted to say thank you for going through my calculations and helping me understand the tax/profit calculations.

Looks like I have some fixing up to do on my prices