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BUS 251Ch 3

Debits, credits, and the trial balance.

Nine short steps: T-accounts, normal balances, the chart of accounts, analysing and journalizing a month of transactions, posting to the ledger, and a trial balance you can trust. Then practise with worked solutions.

Part 1 · The rules · Step 1 of 9

Debit means left, credit means right

← Debit (left)Credit (right) →
Cash
8,000
3,000
2,400
2,600
  1. Oct 2 Paid part of the equipment price3,000 Credit
  2. Oct 4 Paid for insurance2,400 Credit
  3. Oct 15 Client paid in advance1,500 Debit
  4. Oct 20 Collected from a client3,000 Debit
  5. Oct 25 Paid wages2,600 Credit
  6. Oct 28 Paid a supplier400 Credit
  7. Oct 31 Paid a dividend500 Credit
Every account can be drawn as a T-account: its name on top, a left side and a right side. The left side is the debit side and the right side is the credit side. That is all the two words mean. A debit is not bad and a credit is not good.
Try it: Post Lakeside Web Studio's October cash one movement at a time. Cash coming in lands on the left, cash going out on the right. Watch the balance under the line.
Cash movements posted2 of 7
Oct 1Oct 31
Balance
$2,600 Dr
Left (debits)
$8,000
Right (credits)
$5,400
Oct 4: cash went out, so $2,400 goes on the right. Balance = $8,000 − $5,400 = $2,600, shown on the left because the debit side is bigger.
Debit = left side, credit = right side
Positions, not judgements. Whether a debit is good news depends on the account.
Balance = bigger side − smaller side
Add each side, subtract the smaller total from the bigger one, and write the balance on the bigger side.
Cash: money in = debit, money out = credit
So Cash normally has a debit balance. Step 2 shows which accounts normally sit on the right.
Practise

Practise like it is the midterm

Answer first, then check. Fresh numbers writes a new question every time. Journal entries are the main drill: pick that topic and keep going until every type feels routine.

Score
0 / 0
Journal entriesQuestion 1 of 18
Jan 5: The company issued common shares to investors for $25,000 cash. Record the entry.
Debits 0 · Credits 0

Midterm coming up and journal entries still feel shaky?

Bring your practice problems. We work through them together until every type feels routine.

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