DEAR CLID

This is a useful little acronym in accountancy, you may well learn it when studying financial accounting. It has to do with how you either debit (dr) or credit (cr) an account depending on the type of transaction you are considering.

So ‘DEAR’ stands for ‘Debit any Expense, Asset or Reduction in Liabilities’

and ‘CLID’ stands for ‘Credit any Liability, Income or Decrease in Assets’.

Knowing these will help you make the right choice in nearly all of the journal entries you might make, so if for instance you had a sale for €400 and you put the money in the bank it would be fair to say that

1. the sale is an income (therefore credit ‘sales’) and 2. the cash paid to you is an asset (debit bank or cash).

The idea of placing this money in different named accounts can be tricky once you move beyond a simple cash sale. For instance, if you sold something on credit you would have a ‘trade receivables’ account to debit and you still credit ‘sales’, but only upon payment of …

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Moving paper or ‘selling your mortgage’.

In the USA and Canada they sometimes refer to a process of ‘moving paper’ which is where a person sells their mortgage – the actual debt and all the conditions that go with it. That might sound kind of pointless but it would certainly be a valuable option in Ireland and could perhaps offer (if it existed: it doesn’t) a selling advantage of debt holders over non-debt holders in selling a property.

Take an example of a person selling a house for €200,000 if they were able to offer their current mortgage of ECB+1% to the prospective buyer then it might be an attractive proposition! In particular, the bank might benefit because even if the person was in negative equity it might be worthwhile to buy such a debt product at a premium.

People don’t think about buying or selling mortgages (institutions do it all the time), and yet we readily consider buying and selling debt (which is what the bond market is). Why can’t we do the same for the individual …

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