Balancing a T-Account

First, foot the debit side. Cash First, foot the debit side. 3,750 4,300 2,900 850 1,400 700 2,900 10,950

Cash 3,750 4,300 2,900 850 1,400 700 2,900 Next, foot the credit side. 10,950 5,850

Subtract total credits from total debits to obtain the account balance. Cash 3,750 4,300 2,900 850 1,400 700 2,900 5,100 10,950 5,850

Transactions and Balance Sheet Accounts

(A) On November 1, Chris Clark deposits $25,000 in a bank account in the name of NetSolutions. JOURNAL Date Description Debit Credit Page 1 Post. Ref. Nov. 1 2005 1 2 3 4 Cash 25 000 00 Chris Clark, Capital 25 000 00 Invested cash in NetSolutions.

Effects of this entry in the Ledger (A) On November 1, Chris Clark deposits $25,000 in a bank account in the name of NetSolutions. Effects of this entry in the Ledger Cash Chris Clark, Capital Nov. 1 25,000 Nov. 1 25,000

(B) On November 5, NetSolutions bought land for $20,000, paying cash. 4 5 6 7 8 9 10 5 Land 20 000 00 Cash 20 000 00 Purchased land for building site.

Effects of this entry in the Ledger (B) On November 5, NetSolutions bought land for $20,000, paying cash. Effects of this entry in the Ledger Cash Land Nov. 1 25,000 Nov. 5 20,000 Nov. 5 20,000

(C) On November 10, NetSolutions purchased supplies on account for $1,350. 11 12 13 14 15 16 10 Supplies 1 350 00 Accounts Payable 1 350 00 Purchased supplies on account.

Effects of this entry in the Ledger (C) On November 10, NetSolutions purchased supplies on account for $1,350. Effects of this entry in the Ledger Supplies Accounts Payable Nov. 10 1,350 Nov. 10 1,350

(F) On November 30, NetSolutions paid creditors on account, $950. 31 32 33 34 35 36 30 Accounts Payable 950 00 Cash 950 00 Paid creditors on account.

Effects of this entry in the Ledger (F) On November 30, NetSolutions paid creditors on account, $950. Effects of this entry in the Ledger Cash Accounts Payable Nov. 1 25,000 Nov. 5 25,000 Nov. 30 950 Nov. 10 1,350 18 7,500 30 3,650 30 950

Rules of Debit / Credit Balance Sheet Accounts Debits Credits Asset accounts………. Increase (+) Decrease (-) Liability accounts…… Decrease (-) Increase (+) Owner’s equity (capital) accounts…. Decrease (-) Increase (+)

Balance Sheet Accounts ASSETS Asset Accounts LIABILITIES Liability Accounts Debit for increases (+) Credit for decreases (-) Debit for decreases (-) Credit for increases (+) Owner’s Equity Accounts OWNER’S EQUITY Debit for decreases (-) Credit for increases (+)

(D) On November 18, NetSolutions received fees of $7,500 from customers for services provided . 14 15 16 17 18 19 20 18 Cash 7 500 00 Fees Earned 7 500 00 Received fees from customers.

Effects of this entry in the Ledger (D) On November 18, NetSolutions received fees of $7,500 from customers for services provided . Effects of this entry in the Ledger Cash Fees Earned Nov. 1 25,000 Nov. 5 25,000 Nov. 18 7,500 18 7,500

(E) Throughout the month, NetSolutions incurred the following expenses: wages, $2,125; rent, $800; utilities, $450; and miscellaneous, $275 . 18 19 20 21 22 23 24 30 Wages Expense 2 125 00 Rent Expense 800 00 Utilities Expense 450 00 Miscellaneous Expense 275 00 Cash 3 650 00 Paid expenses.

Effects of this entry in the Ledger (E) Throughout the month, NetSolutions incurred the following expenses: wages, $2,125; rent, $800; utilities, $450; and miscellaneous, $275 . Effects of this entry in the Ledger Cash Wages Expense Nov. 1 25,000 Nov. 5 25,000 Nov. 30 2,125 18 7,500 30 3,650 Rent Expense Utilities Expense Nov. 30 800 Nov. 30 450 Miscellaneous Expense Nov. 30 275

In every entry the sum of the debits always equal the sum of the credits.

(G) On November 30, a count revealed that $800 of the supplies inventory had been used. 25 26 27 28 29 30 31 30 Supplies Expense 800 00 Supplies 800 00 Supplies used during November.

Effects of this entry in the Ledger (G) On November 30, a count revealed that $800 of the supplies inventory had been used. Effects of this entry in the Ledger Supplies Supplies Expense Nov. 10 1,350 Nov. 30 800 Nov. 30 800

Double-Entry Accounting “ Double-entry accounting is based on a simple concept: each party in a business transaction will receive something and give something in return. In bookkeeping terms, what is received is a debit and what is given is a credit. The T account is a representation of a scale or balance.” Scale or Balance T account Left Side Receive DEBIT Right Side Give CREDIT Luca Pacioli Developer of Double-Entry Accounting Receive DEBIT Give CREDIT

Rules of Debit / Credit Income Statement Accounts Expense Accounts Revenue Accounts Debit for increases (+) Credit for decreases (-) Debit for decreases (-) Credit for increases (+)

Income Statement Accounts Debits Credits Revenue accounts…… Decrease (-) Increase (+) Expense accounts…… Increase (+) Decrease (-)