1. Balancing a T-Account

2. 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

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

4. 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

5. Transactions and Balance Sheet Accounts

6. (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
Chris Clark, Capital
Invested cash in NetSolutions.

7. 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

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

9. 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

10. (C) On November 10, NetSolutions purchased supplies on account for $1,350.11 12 13 14 15 16 10
Supplies
Accounts Payable
Purchased supplies on account.

11. 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

12. (F) On November 30, NetSolutions paid creditors on account, $950.31 32 33 34 35 36 30
Accounts Payable
Cash
Paid creditors on account.

13. 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
Nov. 10 1,350
18 7,500
30 3,650
30 950

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

15. 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 (+)

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

17. 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

18. (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
Rent Expense
Utilities Expense
Miscellaneous Expense
Cash
Paid expenses.

19. 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
Nov
Miscellaneous Expense
Nov

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

21. (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
Supplies
Supplies used during
November.

22. 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
Nov

23. 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

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

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