Journalizing a Business Transaction – Example 2
Here is another example:
On Jan 2nd, Mr. John purchased a computer for his business for $500. He used a bank check for the transaction.
Step 1: Analysis:
The accounts affected in the transaction are:
- Office Equipment
- Cash in Bank
- Office Equipment is an Asset account
- Cash in Bank is an Asset account
- Office Equipment increases by $500
- Cash in Bank decreases by $500
Step 2: Debit – Credit Rule:
- Increase in the Asset account is recorded as debit. Debit the Office Equipment account for $500.
- Decrease in the Bank account is recorded as credit. Credit Bank account for $500.
Step 3: Prepare a Cash in Bank:
Step 4: Pass a Journal Entry:
