Journalizing a Business Transaction – Example 7
On Jan 15th, 'X' business paid $200 for electricity charges with check No. 202.
Step 1: Analysis:
The accounts affected in the transaction are:
- Electricity Expenses Account
- Cash in Bank
- Electricity Expenses is an Expense account
- Cash in Bank is an Asset account
- Electricity Expenses increase by $200
- Cash in Bank decreases by $200
Step 2: Debit – Credit Rule:
- Increase in the Expense account is recorded as debit. Debit the Electricity Expenses account for $200.
- Decrease in the Asset account is recorded as credit. Credit Cash in Bank account for $200.
Step 3: Prepare a T Account:
Step 4: Pass a Journal Entry:
