Categories: Accounting

Debits and Credits in Accounting

John bought a car of 3000$ from Dj motors on credit.The above transaction is hitting two heads i.e. asset, “a car and liability, Dj motors.
In john books of accounts, his assets and liabilities both are increasing so for assets he has to debit a car and for liability he has to credit Dj motors. Following journal entry will appear in his books:

Illustration: 2

 John paid electricity charges amounting to 50$ so hence john is increasing his expenses (debit) while his asset i.e. cash is decreasing (credit). Therefore entry in his books will be

 

Illustration:3

During the year john received a dividend of 120$ from his investments in stock market. Here revenue (dividend) & asset (cash), both are increasing so the journal entry would be as follows

Illustration: 4

John withdraws 500$ from his business for his personal use. In this situation his capital is decreasing (debit) in form of drawings and his cash is also decreasing (credit).

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