Friday, March 7, 2025

Credit and Debit

 

 

Below is my re-digest of the credit and debit from Wikipedia.

Each transaction that takes place within the economic agent, a business, will consist of at least one debit to a specific account and at least one credit to another specific account, as these accounts are created/opened when the need arises for whatever purpose or situation the business may have.
A debit to one account can be balanced by more than one credit to other accounts, and vice versa. For all transactions, the total debits must be equal to the total credits and therefore balance.

Economic value is a measure of the benefit provided by a good or service to an economic agent, where value for money represents an assessment of whether financial or other resources are being used effectively in order to secure such benefit.

Double-entry book contains a record of an amount in a debit column of a specific account and record the same amount in another specific account's credit column.
Alternatively, debits and credits columns can contain entries in one column, indicating debits with the suffix "Dr" or writing them plain, and indicating credits with the suffix "Cr" or a minus sign.

Typical accounts that relate to almost every business are: Cash, Accounts Receivable, Inventory, Accounts Payable and Retained Earnings. Each account can be broken down further, to provide additional detail as necessary. For example: Accounts Receivable can be broken down to show each customer that owes the company money.

All accounts for a company are grouped together and summarized on the balance sheet in 3 sections which are: Assets, Liabilities and Equity: Assets - Liabilities - Equity (of shareholders) = 0.

All accounts are classified one of the five elements:
- Assets
- Liability (or Debt or Loan)
- Equity (or Capital of shareholders)
- Income (or Revenue or Gain)
- Expense (or Loss)

ASSET ACCOUNTS are economic resources which benefit the business/entity and will continue to do so.
The definition of an asset according to IFRS is as follows, "An asset is a resource controlled by the entity as a result of past events from which future economic benefits are expected to flow to the entity". Assets are accounts viewed as having a future value to the company (i.e. cash, accounts receivable, equipment, computers).
They are Cash, bank, accounts receivable, inventory, land, buildings/plant, machinery, furniture, equipment, supplies, vehicles, trademarks and patents, goodwill, prepaid expenses, prepaid insurance, debtors (people who owe us money, due within one year), VAT input etc.
Two types of basic asset classification:
- Current assets: Assets which operate in a financial year or assets that can be used up, or converted within one year or less are called current assets. For example, Cash, bank, accounts receivable, inventory (people who owe us money, due within one year), prepaid expenses, prepaid insurance, VAT input and many more.
- Non-current assets: Assets that are not recorded in transactions or hold for more than one year or in an accounting period are called Non-current assets. For example, land, buildings/plant, machinery, furniture, equipment, vehicles, trademarks and patents, goodwill etc.

LIABILITY ACCOUNTS record debts or future obligations a business or entity owes to others.
Liabilities include items that are obligations of the company (i.e. loans, accounts payable, mortgages, debts). When one institution borrows from another for a period of time, the ledger of the borrowing institution categorises the argument under liability accounts.
- Current liability, when money only may be owed for the current accounting period or periodical. Examples include accounts payable, salaries and wages payable, income taxes, bank overdrafts, accrued expenses, sales taxes, advance payments (unearned revenue), debt and accrued interest on debt, customer deposits, VAT output, etc.
- Long-term liability, when money may be owed for more than one year. Examples include trust accounts, debenture, mortgage loans and more.

EQUITY ACCOUNTS record the claims of the owners of the business/entity to the assets of that business/entity. The Equity section of the balance sheet typically shows the value of any outstanding shares that have been issued by the company as well as its earnings.
Capital, retained earnings, drawings, common stock, accumulated funds, etc.

INCOME/REVENUE ACCOUNTS record all increases in Equity other than that contributed by the owner/s of the business/entity. Services rendered, sales, interest income, membership fees, rent income, interest from investment, recurring receivables, donation etc.

EXPENSE ACCOUNTS record all decreases in the owners' equity which occur from using the assets or increasing liabilities in delivering goods or services to a customer – the costs of doing business.[30] Telephone, water, electricity, repairs, salaries, wages, depreciation, bad debts, stationery, entertainment, honorarium, rent, fuel, utility, interest etc.

Note:
All Income and expense accounts are summarized in the Equity Section in one line on the balance sheet called Retained Earnings, which, in general, reflects the cumulative profit (retained earnings) or loss (retained deficit) of the company.
Profit and Loss Statement is an expansion of the Retained Earnings Account. It breaks-out all the Income and expense accounts that were summarized in Retained Earnings. The Profit and Loss report is important in that it shows the detail of sales, cost of sales, expenses and ultimately the profit of the company. Most companies rely heavily on the profit and loss report and review it regularly to enable strategic decision making.





Examples
1. A business pays rent with cash: You increase rent (expense) by recording a debit transaction, and decrease cash (asset) by recording a credit transaction.
2. A business receives cash for a sale: You increase cash (asset) by recording a debit transaction, and increase sales (income) by recording a credit transaction.
3.A business buys equipment with cash: You increase equipment (asset) by recording a debit transaction, and decrease cash (asset) by recording a credit transaction.
4. A business borrows with a cash loan: You increase cash (asset) by recording a debit transaction, and increase loan (liability) by recording a credit transaction.
5. A business pays salaries with cash: You increase salary (expenses) by recording a debit transaction, and decrease cash (asset) by recording a credit transaction.
6. The totals show the net effect on the accounting equation and the double-entry principle, where the transactions are balanced.
Account                        Debit (Dr)     Credit (Cr)
1.     Rent (Ex)             100     
        Cash (A)                                     100
2.     Cash (A)                50     
        Sales (I)                                    50
3.     Equipment (A)        5200     
        Cash (A)                                    5200
4.     Cash (A)                 11000     
        Loan (L)                                    11000
5.     Salary (Ex)             5000     
        Cash (A)                                    5000
6.     Total (Dr)            21350     
        Total (Cr)                                21350
        

 
Account type                                      Debit             Credit
Assets                                                 Increase         Decrease
Liability                                             Decrease     Increase
Equity of shareholders                       Decrease     Increase
Revenue                                             Decrease     Increase
Income                                                Decrease     Increase
Expense                                             Increase         Decrease
Loss                                                   Increase         Decrease
Common shares                                 Decrease     Increase
Retained earnings                              Decrease     Increase

Inventory    Assets                           Dr            +#
Wages expense                                 Dr            +#
Accounts payable                             Cr            -#
Retained earnings                             Cr            -#
Revenue                                            Cr            -#
Cost of goods sold                            Dr            +#
Accounts receivable                          Dr            +#
Allowance for doubtful accounts      Cr            -#
Common share Dividends                 Cr            -#
Accumulated depreciation                Cr            -#
Investment in shares                         Dr            +#

 

 

 

 

Tuesday, February 18, 2020

How to write grants for funding


https://billwadge.wordpress.com/2020/02/10/im-good-enough-im-smart-enough-and-dog-gone-it-people-like-me-writing-grant-applications/

I will solve X.
I will apply A to solve X.
I will try to solve X until I have a good idea.
I’m bound to have a good idea at some point.
I plan to have a good idea.
I have several ideas and one is bound to be good.
I have an indexed family of  ideas, one of which must be good.
I  once had a good idea.
I have an idea which I will investigate for goodness.
I have this fascinating idea that must be good for something.
I have an idea, here it is, and here’s why it’s good. But first let me tell you the background.

THE ONE:
“I intend to solve X using idea Y”!


I like this one too:

X has been a major problem since the beginning of time. Y, Z, and T have been tried to solve it, but little progress has been made, and we are stuck with X.
Recently, in the context of V, the use of W has shown great success. Could W be the missing ingredient for solving X? Although this is a plausible and intriguing possibility, a number of technical issues (A,B, and C) need to be addressed before applying W to X.




A simple recipe for a successful proposal, applies to industry-relate:
What is the problem?
How will you solve it?
How strong is your team and approach?




*********************
And her is a bit longer, but still brief explanation of how to write a successful grant application


Aim
In one sentence state the aim. Must read as: “I intend to solve X using idea Y”.

Background
Describe what exactly, not generally, has been done already by other people trying to achieve your aim.
What exactly are yet unresolved issues and problems.

Innovation
What exactly is the innovation (brilliant idea) of this of this proposal?
A “try and learn” approach is not good enough because of low feasibility?

Methodology
Detail the methods and approach to execute that innovation and achieve your objectives.

Feasibility
Timeline / Gantt chart with 3-5 objectives detailing how the aim will be achieved.
Well costed budget.
Well-designed tasks for all participants.
Description of challenges and weaknesses, problems and potential issues of the proposed innovative approach and how they will be resolved.
Do not leave to a chance that the project is feasible just because of applicant’s past achievements.

Benefit and significance
What knowledge will be improved exactly?
Why the selected specific problem is significant compared to other problems?
How exactly (quantified, in numbers) the outcomes of this proposal are going to provide benefits and to who?
What exactly and by how much exactly something will be improved?
Quantitatively, in numbers estimated by you or others, what exactly economic, commercial, environmental, social / cultural benefits will be provided?
How specific products, applications, researchers, businesses, or mums and dads in Joondalup will benefit?
Cost effectiveness and value for money.

Investigators and team
Previous successful projects (especially top category 1 grants)
Strong research leadership/management, mentoring students
Do not list outputs, list impacts, detail why and how the contribution is outstanding.
CI’s research impact numbers must create an impression of outstanding, not just average, impact in the field.
Research environment, existing, supportive, high quality for both the project and PHD students. How exactly University supports you and your research area? Lab resources / Technical skills / Personnel available.
Independent external national/international reviews
What are the outputs not inputs? Not the grants received, but what have you done with the grant money? Create confidence in timely and successful completion.
High profile "stars" FTs, Fls, SPRFs, Fellows of societies, Editors major journals.
Recognised national/international centre.
High profile International visitors. Previous successful collaborations. Industry partners
Teaching or Services
National and international collaborations.
CIs from two independent institutions provide a backup plan and strengthen the proposal. CI skillset must be complimentary, not overlapping. If international partner is required, then why national partner is not good enough? Team must have high impact record.
CI must not just lead, coordinate, oversee or supervise, but do some of the actual work in the lab.
Explain why CI’s are world leaders in their expertise area? Why no one else has so deep experience that they have? Track record must explain the capability to achieve objectives (not aim).
PDH stipends should be provided by the host institution, since Australia pays for it anyway.
How significant are these impacts compared to others?
Link to CIs public researcher profile + link to ORCID.
Better be a well explained sole investigator, than a team who have not really demonstrated significant expertise yet. They may have fewer publications, or ones that are not directly related to the topic.


Notes
Never write bullshit sentences which are too general, be specific.
When the researchers have recently struck gold (discovered something new and important) during their past research, and now they want to follow their gold seam and keep harvesting exciting results, then the grant is funded.
Out-of-the-box, risky, but innovative ideas must have the demonstrated evidence.