Journal Entries

posted Feb 4, 2010, 1:44 PM by Prof Kiernan   [ updated Feb 16, 2011, 12:28 PM ]
Debit or Credit?
Debit doesn't have anything to do with a debit card, it only means left in Latin! Credit means Right!

When writing journal entries I use 2 simple questions to alleviate any confusion. 

Debit (the left side):  What did I get? 
Credit (the right side): How did I get it? 

Here are a few examples of this in action:
 
   1. I sold you my MP3 player for $50
            Debit (the left side):  What did I get? 
                  $50 cash 
            Credit (the right side): How did I get it? 
                  I sold my MP3 player 

        Journal entry:
            Cash                            $50
                    MP3 player                     $50

    2. Purchased Accounting textbook for $160 on account
            Debit (the left side):  What did I get? 
                  an accounting textbook 
            Credit (the right side): How did I get it? 
                  I payed $160 on an accounts payable (on account means you don't pay with cash)

        Journal entry:
            Accounting textbook       $160
                    Accounts Payable           $160

    3. Paid $700 Rent
            Debit (the left side):  What did I get? 
                  A bill for Rent expense
            Credit (the right side): How did I get it? 
                  $700 cash  

        Journal entry:
            Rent Expense               $700
                    Cash                             $700

    4. Sold math book for $75 on account 
            Debit (the left side):  What did I get? 
                  $75 accounts receivable (on account means you don't get cash yet)
            Credit (the right side): How did I get it? 
                  I sold my math book 

        Journal entry:
            Accounts receivable      $75
                    Math Book                    $75

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