Home » Accounting Explanation » The Double Entry system - Debit and Credit


EXAMPLE No.6

Transaction: Sold goods for $5000 on credit to Mr. Z

In this transaction:

1) There are two accounts involved Sales and Debtor or Account Receivable(i.e Mr.Z)
2) Types of accounts are Debtor=Asset and Sales=income
3) There is an increase in sales(income) and Debtors

Therefore, the double entry should be:


  DESCRIPTION DEBIT CREDIT



   Debtor (Mr. Z)   $5000



               Sales   $5000






EXAMPLE No.7

Transaction: Cash $2500 paid to Mr. Z for goods purchased on account

In this transaction:

1) There are two accounts involved Cash and Creditor or account payable(i.e Mr.Z)
2) Types of accounts are Cash=Asset and Creditor=liability
3) There is a decrease in Cash and Creditors

Therefore, the double entry should be:


  DESCRIPTION DEBIT CREDIT



   Creditor (Mr. Z)   $2500



               Cash   $2500






EXAMPLE No.8

Transaction: Cash $200 Received From Mr. Z for goods sold on account

In this transaction:

1) There are two accounts involved Cash and Debtor or account receivable (i.e Mr.Z)
2) Types of accounts are Cash=Asset and Debtor (Mr.Z)=Asset
3) There is an increase in Cash and a decrease in Debtors

Therefore, the double entry should be:


  DESCRIPTION DEBIT CREDIT



   Cash   $200



               Creditor (Mr. Z)   $200