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A Special Journal (Cash Receipts Journal) Used To Record Money Received Cash Receipts Journal is used to record all those transactions which involve cash receipts. Cash receipts transactions include Cash Sales , cash collected from customers, revenue Received, etc. Example, Mr. A is a sole proprietor received cash of Rs. 4000 from customer, Mr. B for merchandise / goods sold on account. In this transaction, cash receipts of Rs. 4000 from customer, Mr. B is to be recorded in cash receipts journal. The journal is to record is shown below: Cash Collected From Customers Journal Entry / Cash Received From Customers Journal Entry                                                                           Cash a/c  4000                                                                                                       Mr. B  4000                                                                               (Cash Received From Customer) Cash account is debited as it is rece

Cash Payments Are Recorded In Which Journal / Purchase Of Merchandise For Cash Would Be Recorded In Which Journal Cash Payment Journal is used to record all Business Transactions involving cash payments. Cash payments journal, which is a Special Journal , include expenses paid for cash, cash paid to suppliers, cash purchases or merchandise purchases or inventory purchases for cash. Example: Mr. A is a sole owner in his business. From the Special Journal of the business, we get this transaction: 2 nd July, 2021: Merchandise Purchased For Cash Rs. 10000. This transaction involves cash payment i.e., the business purchased merchandise / goods from supplier / vendor for cash. The journal entry to record for merchandise / goods purchased for cash is shown below:                                                                                Purchases a/c  10000                                                                                                                      

Accounts Receivable Subsidiary Ledger Or Subledger And Accounts Payable Subsidiary Ledger Or Subledger / Difference Between The Debtor Subsidiary Ledger And Creditor Subsidiary Ledger In Accounts Receivable Subsidiary Ledger , individual records of each customer are recorded separately while in Accounts Payable Subsidiary Ledger , each supplier or vendor’s specific records are recorded separately. From accounts receivable subsidiary ledger account, we know about Cash Collected From Customers and Credit Sales while from accounts payable subsidiary ledger account, we know about Cash Paid to Suppliers or Vendors and Credit Purchases . Usually, accounts receivable subledger beginning balance is started on debit side and ending balance on credit side while accounts payable subledger opening balance is started on credit side and closing balance on debit side normally. Accounts receivable subsidiary ledger shows us the information of parts of current asset i.e., the amount of re

When a business Bought Or Purchased Office Equipment On Account Or On Credit , then office equipment account is debited as it is coming into the business and accounts payable / creditor account is credited as the business is liable to pay the amount of office equipment to suppliers or vendors on later date as agreed upon the Management of the business and the supplier or vendor or creditor. Example: Mr. A, as a Sole Proprietor, bought office equipment of Rs. 30000 from Mr. B On Credit / Account. What is the journal entry for purchasing of office equipment and the effect of this transaction on the accounting equation? The journal entry to record for buying or purchasing office equipment on account is shown below:                                                 Office Equipment a/c  30000                                                                                        Accounts Payable a/c / Sundry Creditor a/c  30000                                                      

When a business Bought Or Purchased Office Equipment For Cash Or For Bank i.e., through check / cheque, then assets accounts are affected. One account is Office Equipment which is a Fixed Asset while other account is a Cash or Bank which is a Current Asset. The journal entry to record is shown below:                                                                        Office Equipment a/c  XXX                                                                                                                     Cash a/c / Bank a/c  XXX                                                                                 (Office Equipment Bought For Cash / Bank) As office equipment is increasing as it is coming into the business, so we debit it and cash or bank is decreasing as cash is going out of the business or money is withdrawn from bank account, so we credit cash account or bank account whichever is the case. For example, Mr. A is a sole owner, bought office equipment of

Do Debit Mean An Increase To An Account And Credit Mean A Decrease To An Account? / Increase And Decrease In Accounts No, debit means the left side of an Account while credit means the right side of an account. An account balance increases or decreases on debit side or credit side, it all depends upon the types of accounts. For assets and expenses accounts, there is an increase in accounts balances of these accounts on debit side as it is a favorable or normal side for these accounts while these accounts balances decrease on credit side. For liabilities, equity and revenue account balances, there is an increase in accounts balances of these accounts on credit side as it is a normal balance for these accounts while on credit side of T Accounts , there is a decrease in accounts balances of these accounts. So, we can say that debit means the left side of an account and credit side is the right side of a T Account. However, assets, expenses and losses are increased on debit

Is Expense Account Increased / Decreased On The Debit Side Or Credit Side Of A T Account / Increase And Decrease In Expense Accounts Expense Accounts are increased on the debit side of a  T-Account  and not credit side of a  T-Account. Actually, when expenses are incurred, these are increased, so we debit these which means these have normal, usual, favorable or positive balances on debit side. On the other hand, whe n  expense accounts, as these are temporary accounts, are closed to Income Summary Account , then these are credited, so these are credited which is a negative, unusual or unfavorable side for these accounts. Expense accounts include cost of sales, salaries expense, rent expense, commission expense, marketing expense, etc.

Why Revenue Accounts Increased On The Debit Side Of T Account? As Revenue Accounts  or Income Accounts have normal, usual, favorable or positive balance on credit side of T-Account , so it increases on the credit side. On the other hand, revenue accounts are decreased on the debit side of t-account as it is a negative, unusual or unfavorable for it. Revenue accounts are increased when the business earned these revenues and are decreased when these are closed to Income Summary Account at the end of the accounting period. Examples of revenue accounts are Sales, Commission Earned, Fees Received, Rent Received, etc.

How To Analyze A Business Transaction? There are four types of steps questions used to analyze a Transaction takes place between two or more parties in the life of a business. To know the answers of these questions help us in understanding the changes occurred in different account balances. Let’s consider a transaction as an example and then describe the four steps to be followed while Analyzing A Transaction . Example: Sold Services For Cash for Rs. 5000. 1. Which types of accounts are involved in a business transaction  This transaction involves Cash account and Sales account. 2. Classification of each type of account involved Sale is a revenue account while Cash is a current asset account. Sales revenue affects owner’s equity account while cash affects assets accounts. 3. Increase / Decrease in Accounts Sales is increasing as it is the result of profitable activities or operational activities of the owner of the business i.e., services are rendered to customers creat

Why To Draw The Accounting Equation On A T-Account? You can draw the Accounting Equation on a T-Account easily if you know about the accounting equation. Firstly, we write the accounting equation and then we draw it on a t-account.                                            Assets             =          Liabilities       +     Owner’s Equity ___________________________________________________________________________________                                        Left Side           =                            Right Side                                                          T-Account ___________________________________________________________________________________                                      Left Side                                             Right Side                                      Debit Side                                           Credit Side                                         Assets             =             Liabilities       +       Own

What Two Accounts Are Affected When A Business Purchases Merchandise For Cash Purchased merchandise or goods purchased for cash journal entry is usually recorded by a debited to a Purchases Account and a credit to a Cash Account or Bank Account (if the payment is made through check or cheque). Example, Mr. A is a sole owner of his business purchased merchandise for cash Rs. 5000 from the supplier, Mr. B. What is the journal entry for Cash Purchases and what is the effect of cash purchases transaction on the accounting equation? The journal entry to record for cash purchases is shown below:                                                                             Purchases a/c  5000                                                                                                                 Cash a/c  5000                                                                                     (Merchandise Purchase for Cash) Note: In the above entry, if the owner purchased

Merchandise Purchased On Credit Journal Entry The purchased of merchandise or goods or items or inventory or stock on account or credit resulted in the debit to Purchases Account and a credit to Accounts Payable / Sundry Creditors Account . The journal entry to record is shown as below:                                                                                  Purchases a/c  XXX                                                                                                             Accounts Payable a/c  XXX                                                                         (Merchandise Purchased On Account / Credit) Note: Purchases on account is also called “ Credit Purchases ” The Effect Of Purchasing Merchandise On Account / Credit On The Accounting Equation Example: Mr. A, as a Sole Proprietor, purchased merchandise of Rs. 10000 from his supplier, Mr. B on account during the accounting period. What is the journal entry to record in the Books of Accoun

The Effect Of Cash Dividend On Retained Earnings Yes, cash dividends decrease Retained Earnings Account as it is paid out of it to stockholders or shareholders of the company or  the corporation. In fact, Dividend is a Contra Equity Account and it is closed to retained earnings account. Retained earnings is a part of equity account. The normal or usual balance of dividend is on debit side while the normal balance of retained earnings is on credit side in retained earnings t account, so dividend is deducted from the retained earnings account. The journal entry to close or transfer dividend account to retained earnings account is shown below:                                                                  Retained Earnings a/c  XXX                                                                                                             Dividend a/c  XXX                                                                   (Dividend Is Transferred To Retained Earnings Acc

Cash Dividend Declared And Paid Effect On The Accounting Equation / The Declaration Of Cash Dividend Affect The Accounting Equation / Dividends That Are Paid To Owners Would Affect Both The When Dividend is declared, then it takes some time to pay it to stockholders / shareholders i.e., the process of declaring and paying dividend to stockholders is not immediate. In case of Net Profit / Net Income for the period, the board of directors decide to declare the cash dividend to stockholders. At this time, it is the Liability of the company to pay its stockholders the amount of dividend for the period from Retained Earnings Account . Declaring and Paying dividend affects the both sides of the Accounting Equation. Example: On 20 th December, 2020, the board of directors of ABC Company decided to declare dividend of Rs. 6 per share for the year. The capital stock / issued capital is 1000 shares and the total amount of dividend must be paid on 25 th January, 2021 is Rs. 6000. At t