Explaning Debits & Credits To Third Graders: Accounting Basics

ACCT 216:

Accounting Basics

Explaining Debits & Credits to Third Graders

Explaining Accounting can be scary, especially if you have to teach a third grader, just ask "Count Dracula".

This is my first week in ACCT 216 actually my first day and one of the questions in our threaded discussion asked "How would you explain debits & credits to a third grader" Very interesting said Count Dracula!

I thought how hard could this be?  I personally believe that most third graders are very bright and can grasp information easier than most adults, why?  Simply because they haven't been exposed to inaccurate information and they will not try to question the method, they will simply learn it and very quickly.

That said my response did require quite a bit of  letting go of the notion that Accounting is challenging and remember that I would have to use different terms that would explain what Assets, Expenses, Liabilities, Equity and Revenue meant, that was the real challenge.

Then I remembered the Lemonade Stand, which is associated with fun and making a little bit of money.

I believe that when teaching children a new subject it is important to keep it interesting and fun! 

QUESTION

How would you explain debits and credits to a third grader?

Great question and I would use the charts approach.  First I would begin with a quick overview of what Assets; Expenses & Liabilities mean first, I would do this by creating a basic chart to keep handy.  

Second I would then explain that:

• Assets

• Expenses

• Liabilities

• Equity

• Revenue

 
Are placed on different columns of a different chart labeled

• Debits   - which is on the left side

• Credits  - which is on the right side

 

Third graders are very bright and can easily grasp new information often times easier than adults. For this example I would utilize an easy to remember scenario such as a lemonade stand.

Lemonade Stand

Assets:  This is the value of your Lemonade stand, your unused cups & your lemonade maker

Liability: You buy Lemons and promise your parents that you will pay them back, so you owe this money  

Equity: This is how much your Lemonade stand is worth, your ownership  

Revenue: The money you make from selling lemonades  

Expenses: To keep a Lemonade stand you pay your parents a small portion for using the space, this is rent. 

Charts 

DEBIT  TO INCREASE - LEFT	CREDIT TO DECREASE - RIGHT
The value of your lemonade stand, including the unused cups and lemonade maker  “ASSET” You bought more cups and they are still unused	The value of your lemonade stand, including the unused cups and lemonade maker  “ASSET” You used the cups.
The money you pay your parents for using the space “EXPENSE” When you owe this money it goes here on the LEFT	The money you pay your parents for using the space “EXPENSE” When you pay your parents this money goes here on the RIGHT

  

DEBIT TO DECREASE – LEFT	CREDIT TO INCREASE - RIGHT
The lemons you bought from your parents & promise to pay them back, you owe this money it is a  “LIABILITY” When you pay your parents back it goes here on the LEFT	The lemons you bought from your parents & promise to pay them back, When you borrow money from your parents it means you owe this money it is a  “LIABILITY” It goes here on the RIGHT
How much your Lemonade stand is worth, your ownership “EQUITY” Your Lemonade stand looses value this amount goes here on the LEFT	How much your Lemonade stand is worth, your ownership “EQUITY” You make lots of money selling lemonades business is good and your  stand increases in value, your ownership amount goes up so it goes here on the RIGHT
The money you made from selling 20 lemonades  this is your cash that you make “REVENUE”	The money you made from selling even more lemonades 30, this is your cash that you made  “REVENUE”

Remember:  

• Debit on the left side

• Credit on the right side

Disclaimer:
I am an Accounting student and not an expert in this field, this information is not intended to override your textbooks or professors lectures. Although I have made every effort to provide accurate information you should not assume that it is and further research may be required.  Do your own due diligence.

Reminder to all students plagiarism is not only unethical but also not legal, you must give credit where credit is due.  To copy and simply paste without giving credit is not acceptable. 

I take great pride in sharing information on my blog that may be helpful to other students so please be mindful, respectful and ethical at all times, it is the right thing to do.



References:
DeVry University  ACCT 216: Week 1 Lecture Accounting Basics.

Please note I am a full time student at DeVry University, but I am not an affiliate of DeVry, my opinions are my own and do not reflect theirs. 



To cite this page: 
http://ameliarojas.blogspot.com/2012/10/explaning-debits-credit-to-third.html 

Thank you and feel free to provide additional comments below.

Amelia Rojas