Accounting Tutorial

14. Sample Transactions

The key to doing transactions is to understand Account Normal Balances Debit (DR) or Credit (CR) and the effect on the Normal Balance of the accounts. A summary is included below.

The next is to know that total Debits = total Credits in transactions.
For a simple journal entry, one Debit = one Credit.

Account Numbering and Normal Balances

 Numbering  Account Type  Normal Balance Balance Change
 100’s or 1000’s  Assets  Debit (DR)  DR increases, CR decreases
 200’s or 2000’s  Liability  Credit (CR)  CR increases, DR decreases
 300’s or 3000’s  Capital  Credit (CR)  CR increases, DR decreases
 400’s or 4000’s  Income  Credit (CR)  CR increases, DR decreases
 500+’s or 5000+’s  Expense  Debit (DR)  DR increases, CR decreases

Sample Entries

Bank Deposit - Accounts Receivable

You received a payment 'on account' for $300 to deposit in the bank.

 Number  Account  DR  CR
 1100  Bank  300.00  
 1400  Accounts Receivable    300.00

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Sale > Non-Inventory

You made a sale not involving an inventory item.

 Number  Account Description  DR  CR
 1400  Accounts Receivable ABC Company  107.00  
 4000  Sales Software Consulting    100.00
 2200  Sales Tax Payable Software Consulting    7.00

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Purchase > Inventory Item

You made a Purchase involving an inventory item.

 Number  Account Description  DR  CR
 1300  Inventory Acme Company  200.00  
 5300  Shipping Expense Acme Company  20.00  
 5350  Tax Expense Acme Company  15.40  
 2000  Accounts Payable Acme Company    235.40

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Adjusting Journal Entry

You made an error involving tax. The following example shows on paper the results, but the software is handled differently.

 Number  Account Description  DR  CR
 5350  Tax Expense Original entry  15.40  
 5350  Accounts Payable Correct entry    15.40
 5350  Accounts Payable New entry  15.70  

To Reverse an entry in HOME BOOKS software right click on the DR or CR entry field to get the following option.

Click to set the value to zero. Change the value to the correct entry.

Wrong Account Used: If the correct was due to using the wrong account, then use the method above to zero the original entry, select the correct account and input the correct amount.

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