A bill is entered into the accounting software. The Company purchases $318 of office supplies with a company credit card. We debit the Expense account for office supplies.Ĭredit Cash (decreases its balance) Example 7: Company Uses Credit Card to Pay for Expenses Analysis: Since a check was written, QuickBooks automatically credits Cash. The Company writes a check to pay for $318 of office supplies. Example 6: Company Writes Check to Pay for Expenses Depreciation is complicated, so be sure to see your accountant when purchasing company assets. In addition, assets must be depreciated over time, with journal entries entered each year for a proscribed number of years. ![]() So we debit an Asset account called Equipment or something similar. The item is too costly to be considered an expense, so it must be entered into the accounting system as an asset. The Company writes a check for $8,500 of equipment. An Expense account called Bank Service Charges receives the debit.Įxample 5: Company Writes a Check to Pay for an Asset Since money was removed from the checking account, Cash is credited. Analysis: This transaction is entered via a journal entry each month when the checking account is balanced. Your bank charges a monthly statement fee of $14. Liability accounts are credit accounts, so crediting the Liability account increases its negative balance (move left on the number line).Ĭredit Loans Payable (increases its balance) Example 3: Monthly Statement Fee from Bank The account to receive the credit is a Liability account called Loans Payable (you may create a separate account or sub-account for each loan). Analysis: Since the money is deposited into the checking account, Cash is debited. Since Equity accounts are negative accounts, crediting this Equity account increases its negative balance by $5,000.Ĭredit Owner’s Equity (increases its balance) Example 2: Company Takes Out a Loan ![]() An Equity account called Owner's Equity or Capital Contribution receives the credit. Analysis: Since money is deposited into the checking account, Cash is debited (the balance increased by $5,000). Example 1: Owner Invests Capital in the Company
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