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In an account, a reference is made to the original entry in the Cash Book or Purchases/Sales Book or Journal, etc., by entering the relevant page number in the folio column.
This will increase Salaries Expense, affecting equity. Expenses increase on the debit side; thus, Salaries Expense will increase on the debit side. On January 30, 2019, purchases supplies on account for $500, payment due within three months. On January 5, 2019, purchases equipment on account for $3,500, payment due within the month. The dollar value of the debits must equal the dollar value of the credits or else the equation will go out of balance.
Checking to make sure the final balance figure is correct; one can review the figures in the debit and credit columns. In the debit column for this cash account, we see that the total is $32,300 (20,000 + 4,000 + 2,800 + 5,500). The credit column totals $7,500 (300 + 100 + 3,500 + 3,600). The difference between the debit and credit totals is $24,800 (32,300 – 7,500). The balance in this Cash account is a debit of $24,800. Having a debit balance in the Cash account is the normal balance for that account.
We know from the accounting equation that assets increase on the debit side and decrease on the credit side. If there was a debit of $5,000 and a credit of $3,000 in the Cash account, we would find the difference between the two, which is $2,000 (5,000 – 3,000). The debit is the larger of the two sides ($5,000 on the debit side as opposed to $3,000 on the credit side), so the Cash account has a debit balance of $2,000. Notice that for this entry, the rules for recording journal entries have been followed. At the same time, inventory costing $2,000 is surrendered by the company. The reduction of any asset is recorded through a credit.
Revenue accounts increase with credit entries, so credit lawn-mowing revenue. On this transaction, Cash has a debit of $5,500. This is posted to the Cash T-account on the debit side beneath the January 17 opening entry in journal example transaction. Accounts Receivable has a credit of $5,500 (from the Jan. 10 transaction). The record is placed on the credit side of the Accounts Receivable T-account across from the January 10 record.
An opening entry, in the books of account, is the initial entry that is used to record the financial transactions which occur at the start of an organization. The contents of the opening entry will typically include the initial cash flow for the firm, which is the funding of the business.
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