Double-Entry Bookkeeping Flashcards
What are the 5 categories in double-entry bookkeeping?
Assets, Liabilities, Equity, Revenue and Expenses.
The DE bookkeeping system is based on the principle that every financial transaction has 2 equal and opposite effects on the accounting equation:
Assets = liabilities + equity
Every transaction is recorded in at least 2 accounts: a debit and a credit account.
The debit entry represents the increase in one account, while the credit entry represents the decrease in another account.
Assets, liabilities and equity accounts are the main categories used in the DE system.
Eg of assets: cash, accounts receivable and inventory. Egs of Liabilities: accounts payable and loans payable. Equity: owners equity and retained earnings.
An increase in an asset account is recorded as…
A debit
An increase of a liability account is recorded as…
A credit
Decreases in liabilities and equity are recorded as
Debits
Expenses and losses are recorded as…
Debits
Dividends or withdrawals are recorded as…
Debits
Increases in liabilities and equity are recorded as…
Credits
Revenues, income and gains are recorded as…
Credits
If a business receives cash from a customer, the cash account(asset) decreases, so it is…
Debited
If a business receives cash from a customer, the accounts receivable account (asset) decreases, so it is..
Credited
If a business pays rent expenses in cash, the rent expense account (expense) increases, so it is…
Debited
If a business pays rent expenses in cash, the cash account(asset) decreases so it is….
Credited
