Journalizing a Business Transaction – Example 9
On Jan 25th, Mr. John wrote check No. 505 for $400, for personal use.
Step 1: Analysis:
The accounts affected in the transaction are:
- Mr. John’s Withdrawal Account
- Cash in Bank Account
- Mr. John’s Withdrawal account is the Owner’s Withdrawal account
- Cash in Bank account is an Asset account
- Mr. John’s Withdrawal account increases by $400
- Cash in Bank account decreases by $400
Step 2: Debit – Credit Rule:
- Increase in the Owner’s Withdrawal account is recorded as debit. Debit Mr. John’s Withdrawal account for $400.
- Decrease in the Asset account is recorded as credit. Credit the Bank account for $400.
Step 3: Prepare a T Account:
Step 4: Pass a Journal Entry:
