Super Sample Accounting Transactions

We learn by example, and that is what this tutorial is all about! Use this tutorial as a guide the next time you have bookkeeping transactions or journal entries to enter into Intuit Quickbooks, Sage Peachtree, or another accounting software programs. We'll look at examples of transactions and journal entries common to most businesses, and also learnwhy we debit and credit the accounts that we do.
Author: Patricia Lynn

When recording an Accounting transaction or journal entry, one account is debited and another account is credited. In some cases, two accounts may receive the debit or credit. But the total amount of the debit must equal the total amount of the credit. For many transactions, the user may only have to select one account as the Accounting software automatically credits or debits the appropriate account. For example, when writing a check, the software automatically credits Cash, but the user must choose the account to receive the debit. When posting journal entries however, the user must select both the account to debit and the account to credit. PS: If you're new to Accounting or Bookkeeping, or just don't "get it," you'll like our popular tutorial Accounting: Making Sense of Debits and Credits. We use simple math to explain debits and credits using the number line shown below. Check it out! In the examples below, QBP (QuickBooks Pro) is often used when referring to the Accounting software program as it is the program we are most familiar with. But regardless of the program you use, the accounts to debit and credit are the same. Let's begin!

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, QBP will automatically 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)
[Remember: A debit adds a positive number and a credit adds a negative number. But you NEVER put a minus sign on a number you enter into QBP.] Example 6: the Company wrote a check for $318 of office supplies. Analysis: Since a check was written, QBP will automatically 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 QBP. Analysis: When you enter a bill, QBP 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. Now as we write a check to pay the bill, QBP will automatically credit Cash. And QBP will debit Accounts Payable - in effect, reversing the earlier credit.

Debit Accounts Payable (decreases its balance) Credit Cash (decrease its balance) Debit Accounts Payable (decreases its balance) Credit Cash (decrease its balance)

Banana Wafers
Serves: 4
WINNER: Rafia Q. Shah of Temple, TX Ms. Shah is a science graduate, homemaker and mother. She enjoys reading, music, and cooking. She creates and develops her own recipes according to availability of ingredients and taste. She learned Filipino cooking from a friend. Ingredients: 2 raw green bananas 1 teaspoon black pepper powder salt to taste oil for frying Remove the skin from bananas and cut into about inch thick slices in a crosswise manner. Heat oil in a frying pan and fry the slices until crisp. Remove from frying pan and place on a plate covered with paper towels. Sprinkle salt & pepper over the fried slices while they are hot. Serve with tomato ketchup.

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Lumpiang Ubod WINNER: Jose C. Magboo

Ingredients: 2 cups fresh ubod 1 cup chicken 1/2 cup shrimp 1 whole medium onion 1 tablespoon garlic 1 teaspoon black pepper Saute onion and garlic. Add chicken and fry until brown. Add shrimp and saute for five minutes. Add ubod, stirring occasionally until meat and vegetables are tender. For sauce, mix 1 cup sugar, 3 teaspoons soy sauce, 3 cups water, 1-1/2 teaspoon salt and bring to a boil. Slowly stir in 3 tablespoons of cornstarch until thick. Season with black pepper and serve with sauce.

Cooking Method: