Debit | Credit Masterclass

Identify the account type and its normal balance.

Utilities Expense
Type | Expense
Normal Balance | Debit

Unearned Revenue
Type | Liability
Normal Balance | Credit

Equipment
Type | Asset
Normal Balance | Debit

Accumulated Depreciation
Type | Contra Asset
Normal Balance | Credit

Accounts Receivable
Type | Asset
Normal Balance | Debit

Does the transaction require a debit or credit?

Paying a debt
➛ Debit Liability, Credit Cash

Recording earned revenue
➛ Credit Revenue

Receiving cash from a customer
➛ Debit Cash

Paying an accrued expense
➛ Debit Expense, Credit Cash

Owner invests capital
➛ Credit Capital, Debit Cash

Write the debit and credit for

Paid $800 for 4 months’ rent in advance
➛ Debit Prepaid Rent $800
➛ Credit Cash $800

Performed services worth $300 on credit
➛ Debit Accounts Receivable $300
➛ Credit Service Revenue $300

Received $500 cash from a customer as advance payment
➛ Debit Cash $500
➛ Credit Unearned Revenue $500

Borrowed $4,000 from the bank
➛ Debit Cash $4,000
➛ Credit Bank Loan Payable $4,000

Purchased equipment for $2,000 on credit
➛ Debit Equipment $2,000
➛ Credit Accounts Payable $2,000

The business pays $1,000 for supplies

$600 cash
$400 on credit

Record the compound entry.

Write the journal entry for each transaction.

The owner invested $20,000 cash.
➛ Debit Cash $20,000
➛ Credit Capital $20,000

The agency completed a project and billed the client $2,500.
➛ Debit Accounts Receivable $2,500
➛ Credit Service Revenue $2,500

Paid office rent of $1,200 cash.
➛ Debit Rent Expense $1,200
➛ Credit Cash $1,200

Received $1,000 from a customer as advance payment for future work.
➛ Debit Cash $1,000
➛ Credit Unearned Revenue $1,000

Questions

Which accounts increased?
➛ Cash
➛ Capital
➛ Accounts Receivable
➛ Service Revenue
➛ Unearned Revenue

Which accounts decreased?
➛ Cash | rent payment

Liabilities created
➛ Unearned Revenue | from customer advance

What is a compound journal entry?
➛ An entry with more than two accounts affected.

What is the normal balance of Unearned Revenue?
➛ Credit

Prepaid expenses are expenses.
➛ False | they are assets.

When a business pays cash, which account is credited?
➛ Cash.

What account is debited when revenue is earned?
➛ None | revenue is credited.

If asking what increases on earning revenue:
➛ Cash or Accounts Receivable are debited.

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Chart of Accounts ➧ Here