Everything looks backwards! A debits & credits overview
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Everything looks backwards! A debits & credits overview
Jumping into the accounting world can be a bit scary. There are lots of new concepts to learn, and things may look a little backwards from you personal bank accounts until you get used to the new w...
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Oh, if only Wave would allow items to be categorized as debits and credits or did handle this correctly 100% of the time. But so many things must be categorized as "deposits" or "withdrawals" which is semantically different from debits and credits. You left out and didn't explain that revenue accounts are credit accounts and expenses are debit accounts. You wrote "expenses/purchases are credits" but actually, an expense is a debit, and the offsetting entry (eg a bill owed, a reduction in cash, an owner investment to cover) is a credit. Wave would be less confusing if you just used basic accounting terms and didn't mask them in ways that can actually be more confusing, not less confusing. Calling certain accounts "categories" is equally confusing. While I love many aspects of Wave, this inability to deal with basic accounting concepts makes the product so much harder to use than it should be, because I spend too much time having to think through things like "what direction does deposit mean to an expense category"?
Hi @dofzin, thank you so much for the feedback! The reason we've got comments on our articles is so that you can let us know where additional information or guidance could be helpful, and in some cases, this can also help us improve the language in the app as well. I'll share this with my team. Please don't hesitate to write if you have any other examples to share.
I agree. You guys have debits and credits mixed up. This makes my accounting a nightmare when trying to reconcile. Please fix this!!!!
Hey @Avalon1225, thanks for reaching out and I am sorry to hear that you're having some issues with your reconciliation. Can you explain further what issues you are having reconciling your accounts and how your debits & credits are adding to that? I would be happy to help dig into things and see what's going on.
I agree. I have always had withdrawals as debits and deposits as credits. THis is how our accountant audits it too. I can't get anything to reconcile without going through every transaction and changing them over. Which then means that it's listed as "refund for xyz" rather than just "xyz". Very frustrating. Was really happy with this product until got to trying to reconcile accounts.
How do I enter a credit note on Wave? I paid a supplier (on account) they gave me a credit note and then raise an invoice each month. If I knew how to enter the credit note I could then enter the invoices to create a declining balance.
Hey @Elem! Thanks for reaching out. Sorry to hear you're having a bit of trouble with reconciliation. I can see you've submitted a support ticket with our team so keep an eye out in your email for a response!
Hi @CITS! Just to confirm you've been issued a credit note by your supplier? If you are paying your supplier and they have issued you credit, is there a particular reason you are creating an invoice for them in turn? If this is not the case are you able to provide a little more detail on your workflow here? We'd be happy to help!
The labelling of Debit and Credits is extremely confusing and the rationale on this page doesn't give any reasoning. To a normal person a deposit would be a credit and a withdrawal would be a debit.
I can't wrap my head around how an expense/purchase would be a credit? If I'm not using a credit card and just using my bank account this makes no sense language-wise and there's no explanation for this. You are literally 'debiting' the value from my account to pay for the expense. When I deposit a cheque, my account is credited that amount.
Hey @GLK
When it comes to debits and credits, it depends on the type of account. Check out this chart which helps me remember on a daily basis!
I've got it printed beside my desk.
Also perhaps this Accounting Coach Article might give you a bit more insight into how debits and credits work!
Hi @GLK . I wish we could give you a clear rationale, but to be completely honest with you accounting is just one of those things. The terms debits and credits are listed in the article in the way that they're used in Accounting. You can also check out the Accounting Coach URL that we have linked at the bottom of the page for more information.
So if I am in the Reconciliation feature and am working on reconciling a credit card account, and it asks me for Statement Balance, do I enter that number as negative?
I understand the Credits and Debits backwards part... its because the Credit is towards the balance owed and the Debit is towards the account's balanced reduced by a payment. However I'm having an issue with reconciliation. There is no information anywhere about this for a credit card that often retains a negative balance (the amount owed)! It shows a credit card balance that is correct (how much I owe on the card) and it says wave has a balance of 0... so it doesn't reconcile. I have no idea how this should be fixed.
It didn't used to be like this. It's confusing as hell now. It's not like this in Xero either. Let's just make it simply guys yeah? You're confusing all of us.
Hello, hello, hello @nancyindenver, @JeremyM and @pmehatch 👋You will want to enter the balance as it appears on the statement. Given the account type is already set in Wave, don't worry about any additional calculations. 📝The number on the statement should be the exact number you enter in Wave. A credit card statement would be entered as a positive number as it's a liability - you are expected to pay that off. A negative balance on a credit card statement would mean you overpaid and have less to pay them. It can be a bit confusing the first few times so if you haven't checked it out yet, give this video a watch.
It's not the credit card statement that's confusing it's the bank account. I've seen the video. Why not simply have columns titled "deposit" and "withdrawal" like everyone else? Do a bit of mystery shopping of your competitors!
What fresh hell is this? This product was working fine until you made a switch. Now some of my account deposits (from the past) show up as credits, and new ones going forward are showing up as debits. It was fine the way it was before. Please fix this. Otherwise, all of your customers are having to manually override hundreds of transactions.
@TylerK
I'm having the exact same issue as @Bryan___ is listing below. In one of my Savings accounts, my interest is showing up as debits although iI input CLEARLY marked as income. I'm going to write a private note about this because I want to share a screenshot.
Hi @Bryan___ & @LaurenM! I just want to clarify, it sounds like transactions are importing incorrectly with the bank connection feature? So debits and credits are being reversed when the transactions are pulling into Wave?
No. In the reconciliation feature your names are backwards. I wrote a ticket on this and the Helpdesk replies says that this is way Wave names all of this.
For my accounts, not only in the Liability _accounts but also the Asset accounts the names of Debits and Credits are the same: The _Debits are the income _and the _Credits are the withdrawals. It's highly confusing. I have to just use the Green and Black text color because Wave has decided to use these words. It's the Reconcile for me that causes so many issues!
I do like how on the Transactions page the buttons do say " income" and "withdrawal"
I know Wave says that this is normal - but with so many Wave customers saying that Accounting doesn't normally call it so, and customers saying that it's confusing, why does Wave choose to do it this way? Why not call it "Additions" or "Subtractions", "In" and "out", "Income" and "outflow"?
I'm not an accountant but I do all of my business accounting. But I need things explained in simple terms. Yes, I have watched the YouTube video about this. But when staring at the "debit" and "credit" words in Reconcile, the concepts are clearly logic-backwards.
Hey @LaurenM , one of the reasons it's listed as debits and credits is that we find most bank statements use this language so we've tried to match it so that it's easier for our users.
With this being said, we do really appreciate you reaching out and actually taking the time to explain the situation as well as why you find this confusing. I do want you to know that this is something that I've brought up to our Accounting Product team as I think your grievances here are very relevant. They've noted this down and this will be something that they discuss further moving forward.
Thanks again for you feedback, as I can't overstate how important user details like these are!
Having expenses/purchases listed as CREDITS in my credit card (liability accounts) when I upload them from the bank means I CAN NOT categorise them because I cannot access my expences chart of accounts .. only the income chart of accounts
How can I categorise my expenditure as shown on my actual credit card correctly?
Do I need to delete the credit cards from the liabilities and upload into the bank account section?
Catherine
Hey there @Eastend_2300
I may need some additional information with regards to what might be happening in your accounts. The below chart shows how debits and credits work in most accounting software.
Would you kindly answer a few things for me?
Thank you kindly!
I agree with the various comments below. To me a CREDIT is when to add moneyto an account (i.e. deposit money into a bank account) and a DEBT is when you Take money out of an account (i.e. write a cheque or pay someone).
Very confusing for a NON Accountant like me. I use WAVE as a simple cash book for a Society. Only deposit money into a bank account and write cheques.
When I run the Account Transactions (General Ledger) report, ALL the Income is shown as a DEBT. and ALL the expenses show as CREDIT.
I agree with the many comments below...
"You guys have debits and credits mixed up. This makes my accounting a nightmare when trying to reconcile. Please fix this!!!!"
I am not an accountant, just a sole proprietor in an unrelated industry. And this reversing the basic concept of debit and credit for most but not all categories or accounts because of some arcane accounting theory is mind bogglingly confusing. Please, for the love of all that you hold dear fix this! This and this alone makes this platform nearly impossible for a beginner like me to use in any practical manner.
Sorry, but your terminology really should be corrected. According to Merriam-Webster:
debit = a charge against a bank deposit account - "Your account will automatically be debited for the amount of your insurance bill every month." This is an amount deducted from an account.
credit = an amount or sum placed at a person's disposal by a bank - "When you return a purchased item, your bank credits your account with the purchase amount." This is an amount deposited into an account.
Yep, mine are reversed too. A deposit is a credit, a withdrawal is a debit. They dont call it a debit card because you use it to make deposits. This is absurd.
Hey @Sleeping_Cat_Books and @MACscr , the reason the terms debit and credit are most commonly known by the way you have described them is because a bank account is considered an asset account (please refer to Barsin's debits and credits chart posted above on April 13th). This also applies to Expense accounts. On the other hand, if you're referring to an Income, Liability, or Equity account, the debits and credits are reversed as understood by GAAP.
If you check out the Help Center article which is linked to this thread, you'll see a link from Accounting Coach at the bottom of the page which explains how debits and credits actually work. Check it out!
Be that as it may, Wave still imports transactions from my bank account reversed so I have to manually correct them to get the correct balance for the account.
No worries. I cant imagine any real accountants using this platform though and figured it was more towards small businesses trying (having to) do it all themselves where you want to keep things simple. I will use something else that doesn't make my account overview show as negative when I get deposits.
Hi @Sleeping_Cat_Books , if there's an issue with your bank imports, I'd recommend reaching out to our Support team via the chatbot and someone can take a look at your connection for you.