Some general rules about debiting and crediting the accounts are:

Expense accounts are debited and have debit balances

Revenue accounts are credited and have credit balances
Asset accounts normally have debit balances

To increase an asset account, debit the account

To decrease an asset account, credit the account

Liability accounts normally have credit balances

To increase a liability account, credit the account
To decrease a liability account, debit the account

Asset Accounts
No.

Account Title

To
Increas
e

Description/Explanation of Account

10
1

Cash

Debit

Checking account balance (as shown in company records),

currency, coins, checks received from customers but not yet
deposited.

12
0

Accounts Receivable

Debit

Amounts owed to the company for services performed or

products sold but not yet paid for.

14
0

Merchandise Inventory

Debit

Cost of merchandise purchased but has not yet been sold.

15
0

Supplies

Debit

Cost of supplies that have not yet been used. Supplies that
have been used are recorded in Supplies Expense.

16
0

Prepaid Insurance

Debit

Cost of insurance that is paid in advance and includes a

future accounting period.

17
0

Land

Debit

Cost to acquire and prepare land for use by the company.

17
5

Buildings

Debit

Cost to purchase or construct buildings for use by the

company.

17
8

Accumulated
Depreciation - Buildings

Credit

Amount of the buildings' cost that has been allocated to

Depreciation Expense since the time the building was
acquired.

18
0

Equipment

Debit

Cost to acquire and prepare equipment for use by the

company.

18
8

Accumulated
Depreciation - Equipment

Credit

Amount of equipment's cost that has been allocated to

Depreciation Expense since the time the equipment was
acquired.

Liability Accounts
No.

Account Title

To
Increas
e

Description/Explanation of Account

21
0

Notes Payable

Credit

The amount of principal due on a formal written promise to

pay. Loans from banks are included in this account.

21
5

Accounts Payable

Credit

Amount owed to suppliers who provided goods and services

to the company but did not require immediate payment in
cash.

22
0

Wages Payable

Credit

Amount owed to employees for hours worked but not yet

paid.

23
0

Interest Payable

Credit

Amount owed for interest on Notes Payable up until the date

of the balance sheet. This is computed by multiplying the
amount of the note times the effective interest rate times
the time period.

24
0

Unearned Revenues

Credit

Amounts received in advance of delivering goods or

providing services. When the goods are delivered or
services are provided, this liability amount decreases.

25
0

Mortgage Loan Payable

Credit

A formal loan that involves a lien on real estate until the loan
is repaid.

Owner's Equity Accounts

No.

Account Title

To
Increas
e

Description/Explanation of Account

29
0

Mary Smith, Capital

Credit

Amount the owner invested in the company (through cash or

other assets) plus earnings of the company not withdrawn
by the owner.

Debit

Amount that the owner of the sole proprietorship has

withdrawn for personal use during the current accounting
year. At the end of the year, the amount in this account will
be transferred into Mary Smith, Capital (account 290).

29
5

Mary Smith, Drawing

Operating Revenue Accounts

No.

Account Title

To
Increas
e

Description/Explanation of Account

31
0

Service Revenues

Credit

Amounts earned from providing services to clients, either for

cash or on credit. When a service is provided on credit, both
this account and Accounts Receivable will increase. When a
service is provided for immediate cash, both this account
and Cash will increase.

Operating Expense Accounts

No.

Account Title

To
Increas
e

Description/Explanation of Account

50
0

Salaries Expense

Debit

Expenses incurred for the work performed by salaried

employees during the accounting period. These employees
normally receive a fixed amount on a weekly, monthly, or
annual basis.

51
0

Wages Expense

Debit

Expenses incurred for the work performed by non-salaried

employees during the accounting period. These employees
receive an hourly rate of pay.

54
0

Supplies Expense

Debit

Cost of supplies used up during the accounting period.

56
0

Rent Expense

Debit

Cost of occupying rented facilities during the accounting

period.

57
0

Utilities Expense

Debit

Costs for electricity, heat, water, and sewer that were used
during the accounting period.

57
6

Telephone Expense

Debit

Cost of telephone used during the current accounting

period.

61
0

Advertising Expense

Debit

Costs incurred by the company during the accounting period

for ads, promotions, and other selling and expenses (other
than salaries).

75
0

Depreciation Expense

Debit

Cost of long-term assets allocated to expense during the

current accounting period.

Non-Operating Revenues and Expenses, Gains, and Losses

No.

81
0
91
0

Account Title

To
Increas
e

Interest Revenues

Credit

Gain on Sale of Assets

Credit

Description/Explanation of Account
Interest and dividends earned on bank accounts,
investments or notes receivable. This account is
increased when the interest is earned and either
Cash or Interest Receivable is also increased.
Occurs when the company sells one of its assets
(other than inventory) for more than the asset's book

value.
96
0

Loss on Sale of Assets

Debit

Occurs when the company sells one of its assets

(other than inventory) for less than the asset's book
value.

Sites with good content on Accounting Basics

http://www.accountingcoach.com/online-accounting-course/07Xpg02.html

Sample Accounting Transactions

Example 1: Owner invests $5,000 in the company. 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 Owners 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 Owners Equity (increases its balance)

Example 2: The Company borrowed $8,000 from a bank. Analysis: Since the money will be deposited into the
checking account, Cash is debited (the balance increased by $8,000.) The account to receive the credit is a Liability
account called Loans Payable (you may create a separate account or subaccount for each loan). Liability accounts
are credit accounts, so crediting the Liability account increases its negative balance by $8,000 (move to the left on
the number line).

Debit Cash (increases its balance)

Credit Loans Payable (increases its balance)
Example 3: Your bank charges you a $14 a month statement fee. Analysis: This transaction is entered via a
journal entry each month when the statement fee is identified on the bank statement. Since money was removed
from the checking account, Cash must be credited (the balance decreased by $14). The Expense account called
Bank Service Charges will receive the debit.

Debit Bank Fees (increases its balance)

Credit Cash (decreases its balance)
Example 4: You write a check for a loan payment of $540 for the $8,000 loan you acquired in Example
2. Of this amount, $500 is being applied to the principal, and $40 is loan interest. Analysis: Since a check
is being written, the Accounting software will automatically credit Cash. In this case the debit is split between two
accounts. To reflect the $500 that has been applied to the loan balance, debit the loan account. (Since it is a
liability account, a debit will reduce it's balance, which is what you want.) The $40 interest paid is an expense, so
debit the expense account called Interest. Remember that even though the debit is split between two accounts,
the total debit must always equal the total credit.

Debit Loans Payable $500 (decreases its balance)

Debit Interest Expense $40 (increases its balance)
Credit Cash $540 (decreases its balance)
Example 5: the Company wrote a check for $8,500 of equipment. Analysis: Since a check was written, credit
Cash. We will debit an Asset account called Equipment or something similar. Note: Remember, if you purchase an
item for more than about $500, you should depreciate the item; not expense it. ($500 is a "rule of thumb," but I
am not suggesting you use it.) So the Asset account receives the debit instead of an expense account. To record
the depreciation, journal entries would be entered for one or more years. Always consult with your Accountant
when purchasing company assets.

Debit Equipment (increases its balance)

Credit Cash (decreases its balance)

Example 6: the Company wrote a check for $318 of office supplies. Analysis: Since a check was written,
credit Cash. We debit the Expense account called Office.

Debit Office (increases its balance)

Credit Cash (decreases its balance)
Example 7: the Company purchased $318 of office supplies on credit and you entered a bill into
system. Analysis: When you enter a bill, system automatically credits the Liability account called Accounts
Payable. And since you purchased office supplies, the Office expense account is debited.

Debit Office (increase its balance)

Credit Accounts Payable (increases its balance)
Example 8: You paid the bill for $318 of office supplies purchased in Example 7. Analysis: When the bill
was entered, Office was debited and A/P was credited.

Debit Accounts Payable (decreases its balance)

Credit Cash (decrease its balance)
Example 9: the Company paid $450 cash for Product A - a COGS part. Analysis: In the check window,
choose the COGS account from the Expenses tab, or choose an Item from the Items tab and then the COGS
account associated with the Item will be debited.

Debit COGS (increase its balance)

Credit Cash (decrease its balance)
Example 10: the Company sold Product A for $650 cash. Analysis: When you enter the cash sale, debit Cash
(or you could choose to deposit to Undeposited Funds - see Example 14). You will have to choose an Item for the
sale it might be Prod A income and associated with the Sales account.

Debit Cash (increases its balance)

Credit Sales (increases its balance)
Example 11: the Company sold Product A for $650 on credit. Analysis: When you create an invoice, you
must specify an Item for each separate charge on the invoice. credit the revenue account(s) associated with these
Items. And debits the Invoice amount to A/R.

Debit Accounts Receivable (increases the balance)

Credit Sales (increases the balance)
Example 12: the Company received a payment for the $650 invoice above. Analysis: When you created the
invoice, debit the A/R account. When you post the invoice payment, credit A/R - in effect reversing the earlier
debit. Debit Cash.

Debit Cash (increases the balance)

Credit A/R (decreases the balance)
Example 13: The owners writes himself a check for $1,000. Analysis: Since a check was written, credit
Cash. The account you chose for the debit is and Equity account called Draw (Sole Proprietor) or Distribution
(Corporation). Note: These are the only non-contra Equity accounts that are positive accounts and receive debits.

Debit Owners Draw (increases its balance)

Credit Cash (decrease its balance)
Example 14: the Company has many sales receipts during the day, but you would like one deposit to
Cash for the entire day's sales. Scenario: You receive over 50 cash payments each day, For each cash sale, you
use Create Sales Receipt. For payment of an invoice, you use Receive Payments. You may also opt to enter a
payment directly using Record Deposits.

JOURNAL ENTRIES, ACCOUNT STATEMENT and ACCOUNT BALANCES

EXAMPLE
Example 1: Financing Activities

Owner invested $10,000 in the company.

Analysis of Transaction
Steps

Debit or Credit ?
Increase in Assets (Cash) by $10,000

Debit

Increase in Owner's Equity by $10,000

Credit

Journal Entry
Debit

Credit

Cash
10,000
Owner's Equity
10,000

Description of Journal Entry

Owner invested $10,000 in the company.
Results of Journal Entry
Cash balance increases by $10,000. --> Increase in Assets
Owner's Equity balance increases by $10,000. --> Increase in Owner's Equity

Example 2: Financing Activities

The company borrowed $20,000 from a bank.

Analysis of Transaction
Steps

Debit or Credit ?
Increase in Assets (Cash) by $20,000

Debit

Increase in Liabilities (Borrowings) by $20,000

Credit

Journal Entry
Debit

Credit

Cash
20,000
Borrowings
20,000

Description of Journal Entry

Borrowed $20,000.
Results of Journal Entry
Cash balance increases by $20,000. --> Increase in Assets
Borrowings balance increases by $10,000. --> Increase in Liabilities

Example 3: Investing Activities

The company purchased $12,000 equipment and paid in cash.

Analysis of Transaction
Steps

Debit or Credit ?
Increase in Assets (Equipment) by $12,000

Debit

Decrease in Assets (Cash) by $12,000

Credit

Journal Entry
Debit

Credit

Equipment
12,000
Cash
12,000

Description of Journal Entry

Purchased $12,000 equipment in cash.
Results of Journal Entry
Equipment balance increases by $12,000. --> Increase in Assets
Cash balance decreases by $12,000. --> Decrease in Assets
Example 4: Operating Activities

The company purchased $6,000 merchandise (600 units) on credit.

Analysis of Transaction
Steps

Debit or Credit ?
Increase in Assets (Merchandise) by $6,000

Debit

Increase in Liabilities (Accounts Payable) by $6,000

Credit

Journal Entry
Debit

Credit

Merchandise
6,000
Accounts Payable
6,000

Description of Journal Entry

Purchased $6,000 merchandise on credit.
Results of Journal Entry
Merchandise balance increases by $6,000. --> Increase in Assets
Accounts Payable balance increases by $6,000. --> Increase in Liabilities
Example 5: Operating Activities

The company sold 500 units of merchandise at the price of $11,000. Customer paid $9,000 in cash at the time of sale.
Analysis of Transaction
Note: This transaction includes both "REVENUE" and "EXPENSE" components.
(1) REVENUE side
Steps

Debit or Credit ?
Increase in Assets (Cash) by $9,000

Debit

Increase in Assets (Accounts Receivable) by $2,000

Debit

Increase in Revenue (Sales) by $11,000

Credit

(2) EXPENSE side

Steps

Debit or Credit ?

Increase in Expenses (Cost of Merchandise Sold) by $5,000

($6,000 / 600 units = $10 per unit)
($10 per unit X 500 units sold = $5,000 cost)

Debit

Decrease in Assets (Merchandise) by $5,000

Debit

(1) REVENUE Journal Entry

Debit

Credit

Cash
9,000
Accounts Receivable
9,000
Sales Revenue
11,000
Description of Journal Entry
Sold merchandise at $11,000 price and received $9,000 in cash.
Results of Journal Entry
Cash balance increases by $9,000. --> Increase in Assets
Accounts Receivable balance increases by $2,000. --> Increase in Assets
Sales Revenue account balance increases by $11,000. --> Increase in Revenue
(2) EXPENSE Journal Entry
Debit

Credit

Cost of Merchandise Sold

5,000
Merchandise
5,000

Description of Journal Entry

To record the cost of merchandise sold.
Results of Journal Entry
Merchandise balance decreases by $5,000. --> Decrease in Assets
Cost of Merchandise Sold account balance increases by $5,000. --> Increase in Expense
Example 6: Operating Activities

The company paid $3,500 salaries.

Analysis of Transaction
Steps

Debit or Credit ?

Increase in Expenses (Salaries Expense) by $3,500

Debit

Decrease in Assets (Cash) by $3,500

Credit

Journal Entry
Debit

Credit

Salaries Expense
3,500
Cash
3,500

Description of Journal Entry

Paid $3,500 salaries.
Results of Journal Entry
Cash balance decreases by $3,500. --> Decrease in Assets
Salaries Expense account balance increases by $3,500. --> Increase in Expenses
Example 7: Operating Activities

The company paid $1,500 rent.

Analysis of Transaction
Steps

Debit or Credit ?
Increase in Expenses (Rent Expense) by $1,500

Debit

Decrease in Assets (Cash) by $1,500

Credit

Journal Entry
Debit

Credit

Rent Expense
1,500
Cash
1,500

Description of Journal Entry

Paid $1,500 rent.
Results of Journal Entry
Cash balance decreases by $1,500. --> Decrease in Assets
Rent Expense account balance increases by $1,500. --> Increase in Expenses

ACCOUNT STATEMENT
Summary of above Journal Entries
Journal Entries
No.

(1)

Debit

Credit

Cash
10,000

(1)

Owner's Equity
10,000
Owner invested $10,000 in the company.

(2)

Cash
20,000

(2)

Borrowings
20,000
Borrowed $20,000.

(3)

Equipment
12,000

(3)

Cash
12,000
Purchased $12,000 equipment in cash.

(4)

Merchandise
6,000

(4)

Accounts Payable
6,000
Purchased $6,000 merchandise on credit.

(5)-1

Cash
9,000

(5)-1

Accounts Receivable
2,000

(5)-1

Sales
11,000
Sold merchandise at $11,000 price and received
$9,000 in cash.

(5)-2

Cost of Goods Sold

5,000

(5)-2

Merchandise
5,000
To record the cost of goods sold ($5,000 merchandise).

(6)

Salaries Expense
2,500

(6)

Cash
3,500
Paid $2,500 salaries.

(7)

Rent Expense
1,500

(7)

Cash
1,500
Paid $1,500 rent.

Calculating Accounting Balances

Cash

Debit

Credit

(1)

10,000

(3)

12,000

(2)

20,000

(6)

2,500

(5)-1

9,000

(7)

1,500

Balance

23,000

Accounts Receivable

Debit

Credit

(5)-1

2,000

Balance

2,000

Merchandise

Debit

Credit

(4)

6,000

Balance

1,000

(5)-2

5,000

Equipment

Debit

Credit

(3)

12,000

Balance

12,000

Accounts Payable

Debit

Credit

(4)

6,000

Balance

6,000

Sales

Debit

Credit

(5)-1

11,000

Balance

11,000

Cost of Goods Sold

Debit

Credit

(5)-2

5,000

Balance

5,000

Salaries Expense

Debit

Credit

(6)

2,500

Balance

2,500

Rent Expense

Debit

Credit

(7)

1,500

Balance

1,500