Journal Entries

Journal Entries

Quick Study Sheet

Transactions can be summarized this way:

1. You get something and you give up something to get it (an asset or a liability)
2. You provide goods or services in exchange for an asset
3. You are provided services that you pay for or will pay for later
4. You use (up) an asset in your day to day business to get revenues

Each asset, liability, owner’s equity, revenue, and expense account gets a “T” account. It is called a T account because you draw a T first.

Debit is always on the LEFT
Credit is always on the RIGHT

Assets & Expenses –

Increases are debits
Decreases are credits

Liabilities, Owner’s Equity, Revenues –

Increases are credits
Decreases are debits

First – decide what account is being affected and what type of account it is
Second – decide if that account is increasing or decreasing
Third – use the above guidelines to determine if the change is a debit or a credit

Write the journal entry to show the accounts that changing:

Debit account name           $XXX
         Credit account name            $XXX

Record to the “T” account and balance the account:

Make a “T” account for each account name used – one “T” account for each account

For the amount of each journal entry made, put the debits on the left and credits on the right

Add up all the debits, the left side

Add up all the credits, the right side

Take the largest number less the smallest number and put the difference on the largest side

Assets & Expenses – will always have a debit balance
Liabilities/Owner’s Equity/Revenues – will always have a credit balance