Paid $300 for supplies previously purchased. To increase an asset, we debit and to increase a liability, use credit. We analyzed this transaction as increasing the asset Supplies and the liability Accounts Payable. To increase an asset, we debit and to decrease an asset, use credit. We analyzed this transaction as increasing the asset Truck and decreasing the asset Cash. We analyzed this transaction as increasing the asset Equipment and decreasing the asset Cash. The journal entry would look like this:Ģ. We learned you increase an asset with a DEBIT and increase an equity with a CREDIT. We analyzed this transaction by increasing both cash (an asset) and common stock (an equity) for $30,000. The owner invested $30,000 cash in the corporation. The DEBIT amounts will always equal the CREDIT amounts.įor another example, let's look at the transaction analysis we did in the previous chapter for Metro Courier (click Transaction analysis):ġ.The DEBITS are listed first and then the CREDITS. The entry must have at least 2 accounts with 1 DEBIT amount and at least 1 CREDIT amount.When a business transaction requires a journal entry, we must follow these rules: Journal entries are the way we capture the activity of our business. This lesson will cover how to create journal entries from business transactions. Double-entry bookkeeping, in accounting, is a system of bookkeeping so named because every entry to an account requires a corresponding and opposite entry to a different account.
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