Debits and Credits - T-Accounts, Journal Entries - Accounting ...

Another way to visualize business transactions is to write a general journal entry. Each general journal entry lists the date, the account title(s) to be ... DebitsandCredits(Explanation) PrintPDF Part1 IntroductiontoDebitsandCredits,WhatIsanAccount?,Double-EntryAccounting,Debits&Credits Part2 T–accounts,JournalEntries,WhenCashIsDebitedandCredited Part3 NormalBalances,Revenues&GainsareUsuallyCredited,Expenses&LossesareUsuallyDebited,Permanent&TemporaryAccounts Part4 Bank'sDebits&Credits,Bank'sBalanceSheet,Recap T-accounts AccountantsandbookkeepersoftenuseT-accountsasavisualaidtoseetheeffectofatransactionorjournalentryonthetwo(ormore)accountsinvolved. Tolearnmoreabouttheroleofbookkeepersandaccountants,visitourtopicAccountingCareers. WewillbeginwithtwoT-accounts:CashandNotesPayable. Let'sdemonstratetheuseoftheseT-accountswithtwotransactions: OnJune1,2020acompanyborrows$5,000fromitsbank.Asaresult,thecompany'sassetCashmustbeincreasedby$5,000anditsliabilityNotesPayablemustbeincreasedby$5,000.ToincreasetheassetCashtheaccountneedstobedebited.Toincreasethecompany'sliabilityNotesPayablethisaccountneedstobecredited.AfterenteringthedebitsandcreditstheT-accountslooklikethis: OnJune2,2020thecompanyrepays$2,000ofthebankloan.Asaresult,thecompany'sassetCashmustbedecreasedby$2,000anditsliabilityNotesPayablemustbedecreasedby$2,000.ToreducetheassetCashtheaccountwillneedtobecreditedfor$2,000.TodecreasetheliabilityNotesPayablethataccountwillneedtobedebitedfor$2,000.TheT-accountsnowlooklikethis: Confused?SendFeedback JournalEntries Anotherwaytovisualizebusinesstransactionsistowriteageneraljournalentry.Eachgeneraljournalentryliststhedate,theaccounttitle(s)tobedebitedandthecorrespondingamount(s)followedbytheaccounttitle(s)tobecreditedandthecorrespondingamount(s).Theaccountstobecreditedareindented.Let'sillustratethegeneraljournalentriesforthetwotransactionsthatwereshownintheT-accountsabove. Confused?SendFeedback WhenCashIsDebitedandCredited Becausecashisinvolvedinmanytransactions,itishelpfultomemorizethefollowing: Whenevercashisreceived,debitCash. Whenevercashispaidout,creditCash. WiththeknowledgeofwhathappenstotheCashaccount,thejournalentrytorecordthedebitsandcreditsiseasier.Let'sassumethatacompanyreceives$500onJune3,2020fromacustomerwhowasgiven30daysinwhichtopay.(InMaythecompanyhadrecordedthesaleandanaccountsreceivable.)OnJune3thecompanywilldebitCash,becausecashwasreceived.Theamountofthedebitandthecreditis$500.Enteringthisinformationinthegeneraljournalformat,wehave: Allthatremainstobeenteredisthenameoftheaccounttobecredited.Sincethiswasthecollectionofanaccountreceivable,thecreditshouldbeAccountsReceivable.(BecausethesalewasalreadyrecordedinMay,youcannotenterSalesagainonJune3.) OnJune4thecompanypaid$300toasupplierformerchandisethecompanyreceivedinMay.(InMaythecompanyrecordedthepurchaseandtheaccountspayable.)OnJune4thecompanywillcreditCash,becausecashwaspaid.Theamountofthedebitandcreditis$300.Enteringtheminthegeneraljournalformat,wehave: Allthatremainstobeenteredisthenameoftheaccounttobedebited.Sincethiswasthepaymentonanaccountpayable,thedebitshouldbeAccountsPayable.(BecausethepurchasewasalreadyrecordedinMay,youcannotenterPurchasesorInventoryagainonJune4.) Tohelpyoubecomecomfortablewiththedebitsandcreditsinaccounting,memorizethefollowingtip: Here'saTip Whenevercashisreceived,theCashaccountisdebited(andanotheraccountiscredited).Whenevercashispaidout,theCashaccountiscredited(andanotheraccountisdebited). 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AllTopics Bookkeeping Financial Managerial Suggested Alphabetical HowtoBegin(Video) 01.AccountingBasics 02.DebitsandCredits 03.ChartofAccounts 04.Bookkeeping 05.AccountingEquation 06.AccountingPrinciples 07.FinancialAccounting 08.AdjustingEntries 09.FinancialStatements 10.BalanceSheet 11.WorkingCapitalandLiquidity 12.IncomeStatement 13.CashFlowStatement 14.FinancialRatios 15.BankReconciliation 16.AccountsReceivableandBadDebtsExpense 17.AccountsPayable 18.InventoryandCostofGoodsSold 19.Depreciation 20.PayrollAccounting 21.BondsPayable 22.Stockholders'Equity 23.PresentValueofaSingleAmount 24.PresentValueofanOrdinaryAnnuity 25.FutureValueofaSingleAmount 26.NonprofitAccounting 27.Break-evenPoint 28.ImprovingProfits 29.EvaluatingBusinessInvestments 30.ManufacturingOverhead 31.NonmanufacturingOverhead 32.ActivityBasedCosting 33.StandardCosting AccountingCareers CertificatesofAchievement TaketheTour Join501,550subscribers Youarealreadysubscribed.Thisofferisnotavailabletoexistingsubscribers. 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