(Hello, I am very confused in this discussion post that I was wondering if you can give me another example, I am not exactly sure where to start) Give a unique example of a business transaction. Then explain and show the T-account info. Create a fictitious company, then create a fictitious scenario. Example: Owner invests $5,000. Analysis: Since money is deposited into the checking account, Cash is debited (the balance increased by $5,000). What account receives a credit? An Equity account called Owner’s Equity or Capital Contribution. Since Equity accounts are ‘negative’ accounts, crediting this Equity account increases its balance by $5,000. Debit Cash (increase its balance) Credit Owner’s Equity (increases its balance).
Suppose X Co. sells goods to a customer for cash for $10,000.
Analysis:
Since X Co. sells goods to a customer for cash. So, cash comes in and this is the reason why Cash is debited (the balance increased by $10,000).
What account receives a credit?The sales account will be credited. Since Sales account is a type of income, crediting this Sales account increases its balance by $10,000.
So, final entry:
Debit Cash (increase its balance)
Credit Sales (increases its balance).
T- Accounts
Dr. | Cash Account | Cr. | |
Description | Amount | Description | Amount |
To Sales Account | 10,000 | ||
Dr. | Sales Account | Cr. | |
Description | Amount | Description | Amount |
By Cash Account | 10,000 |
As cash account is debited, so on the debit side of cash account, to sales account is written.
And as Sales Account is credited, so on the credit side of sales account, By cash account is written.
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