Debit | Credit Masterclass
Module 1:
Foundations of Accounting
Duration:
45-60 minutes
Level:
Beginner to Diploma-Level
Lesson Objectives
➛ Apply debit and credit rules to more complex transactions.
➛ Record multi-step journal entries.
➛ Identify account types quickly and accurately.
➛ Analyze how each transaction affects the accounting equation.
➛ Use T-accounts to track multiple related entries.
Key Vocabulary
➛ Compound Entry
➛ Contra Account
➛ Unearned Revenue
➛ Prepaid Expense
➛ Accrued Expense
➛ Accrued Revenue
➛ Normal Balance
Normal Balances Refresher
Account Type
Assets
Expenses
Drawings
Liabilities
Equity | Capital
Revenue
Assets
Expenses
Drawings
Liabilities
Equity | Capital
Revenue
Normal Balance
Debit
Debit
Debit
Credit
Credit
Credit
Debit
Debit
Debit
Credit
Credit
Credit
Master Debit | Credit Rules
Debit increase
Assets
Expenses
Drawings
Assets
Expenses
Drawings
Credit increase
Liability
Capital
Revenue
Liability
Capital
Revenue
Every transaction must balance.
Compound Entries | Advanced
Example
Business buys supplies worth $500
Pays $300 cash
Owes $200 on account
Entry
Debit
Supplies $500
Supplies $500
Credit
Cash $300
Accounts Payable $200
Cash $300
Accounts Payable $200
Still balanced
500 = 300 + 200
Special Situations
1. Prepaid Expenses | Asset ➧ Expense later
Pay rent for 6 months in advance
Debit
Prepaid Rent
Prepaid Rent
Credit
Cash
Cash
Special Situations
2. Unearned Revenue | Liability ➧ Revenue later
Customer pays in advance
Debit
Cash
Cash
Credit
Unearned Revenue
Unearned Revenue
Special Situations
3. Accrued Expenses | Expense now, pay later
Salaries owed
Debit
Salaries Expense
Salaries Expense
Credit
Salaries Payable
Salaries Payable
Special Situations
4. Accrued Revenue | Earn now, receive later
Service done, customer hasn’t paid
Debit
Accounts Receivable
Accounts Receivable
Credit
Service Revenue
Service Revenue
T-Accounts for Multi-Step Transactions
Example
Paid salary of $400 cash.
Salaries Expense
Debit | 400
Debit | 400
Cash
Credit | 400
Credit | 400
Classify + Normal Balance
Identify the account type and its normal balance.
➛ Utilities Expense
➛ Unearned Revenue
➛ Equipment
➛ Accumulated Depreciation
➛ Accounts Receivable
Debit or Credit?
Does the transaction require a debit or credit?
➛ Paying a debt
➛ Recording earned revenue
➛ Receiving cash from a customer
➛ Paying an accrued expense
➛ Owner invests capital
Prepare the Journal Entry
Write the debit and credit for
➛ Paid $800 for 4 months’ rent in advance
➛ Performed services worth $300 on credit
➛ Received $500 cash from a customer as advance payment
➛ Borrowed $4,000 from the bank
➛ Purchased equipment for $2,000 on credit
Compound Entry
The business pays $1,000 for supplies
$600 cash
$400 on credit
Record the compound entry.
Mini Case Study
A small digital marketing agency recorded these transactions today
➛ The owner invested $20,000 cash.
➛ The agency completed a project and billed the client $2,500.
➛ Paid office rent of $1,200 cash.
➛ Received $1,000 from a customer as advance payment for future work.
Questions
➛ Write the journal entry for each transaction.
➛ Which accounts increased?
➛ Which accounts decreased?
➛ Identify any liabilities created.
Quick Quiz
➛ What is a compound journal entry?
➛ What is the normal balance of Unearned Revenue?
➛ What account is debited when revenue is earned?
➛ True or False | Prepaid expenses are expenses.
➛ When a business pays cash, which account is credited?
Answers ➧ Here
Chart of Accounts ➧ Here