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. 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).

Compute the balance of the cash account:

This is posted to the Service Revenue T-account on the credit side. In the journal entry, Equipment has a debit of $3,500. This single entry system – what is it is posted to the Equipment T-account on the debit side. This is posted to the Accounts Payable T-account on the credit side.

Formatting When Recording Journal Entries

When you enter information into a journal, we say you are journalizing the entry. Journaling the entry is the second step in the accounting cycle. When we introduced debits and credits, you learned about the usefulness of T-accounts as a graphic representation of any account in the general ledger. But before transactions are posted to the T-accounts, they are first recorded using special forms known as journals.

Credit Debit

This is posted to the Utility Expense T-account on the debit side. You will notice that the transactions from January 3 and January 9 are listed already in this T-account. The next transaction figure of $300 is added on the credit side. In the journal entry, Cash has a debit of $4,000. You will notice that the transaction from January 3 is listed already in this T-account. The next transaction figure of $4,000 is added directly below the $20,000 on the debit side.

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. As you can see, there is one ledger account for Cash and another for Common Stock. Cash is labeled account number 101 because it is an asset account type.

• Some of the listed transactions have been ones we have seen throughout this chapter.
• A journal is the first place information is entered into the accounting system.
• Checking to make sure the final balance figure is correct; one can review the figures in the debit and credit columns.

Journalizing Transactions

Accountants use special forms called journals to keep track of their business transactions. A journal is the first place information is entered into the accounting system. A journal is often referred to as the book of original entry because it is the place the information originally enters into the system. A journal keeps a historical account of all recordable transactions with which the company has engaged. In other words, a journal is similar to a diary for a business.

LO 3.5Indicate whether each account that follows has a normal debit or credit balance. Once all journal entries have been posted to T-accounts, we can check to make sure the accounting equation remains balanced. A summary showing the T-accounts for Printing Plus is presented in Figure 3.10. This is posted to the Cash T-account on the debit side beneath the January 17 transaction.

It is not taken from previous examples but is intended to stand alone. When filling in a journal, there are some rules you need to follow to improve journal entry organization. Give some examples of transactions that would have resulted in the $4,400 posting to the account. Give some examples of transactions that would have resulted in the $1,900 posting to the account. LO 3.5For each of the following items, indicate whether a debit or a credit applies.

LO 3.1Identify the normal balance for each of the following accounts. As of October 1, 2017, Starbucks had a total of $1,288,500,000 in stored value card liability. This similarity extends to other retailers, from clothing stores to sporting goods to hardware. No matter the size of a company and no matter the product a company sells, the fundamental accounting entries remain the same.

In the last column of the Cash ledger account is the running balance. This shows where the account stands after each transaction, as well as the final balance in the account. How do we know on which side, debit or credit, to input each of these balances?

In the journal entry, Cash has a debit of $2,800. This is posted to the Cash T-account on the debit side. You will notice that the transactions from January 3, January 9, January 12, and January 14 are listed already in this T-account. The next transaction figure of $2,800 is added directly below the January 9 record on the debit side. The new entry is recorded under the Jan 10 record, posted to the Service Revenue T-account on the credit side.