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


EXAMPLE No.3

Transaction: Purchased Goods for $2000

In this transaction:

1) There are two accounts involved purchases and Cash
2) Types of accounts are Cash=Asset and Purchases=Expenses
3) There is an increase in purchases and a decrease in Cash

Therefore, the double entry should be:


  DESCRIPTION DEBIT CREDIT



   Purchases (Goods)   $2000



               Cash   $2000






EXAMPLE No.4

Transaction: Sold goods for $5000

In this transaction:

1) There are two accounts involved Sales and Cash
2) Types of accounts are Cash=Asset and Sales=Income
3) There is an increase in sales and Cash

Therefore, the double entry should be:


  DESCRIPTION DEBIT CREDIT



   Cash   $5000



               Sales (Goods)   $5000






EXAMPLE No.5

Transaction: Purchased goods for $3000 on credit from Mr.Z

In this transaction:

1) There are two accounts involved Purchases and Creditor or account payable(i.e Mr.Z)
2) Types of accounts are Creditor=liability and Purchases=Expenses
3) There is an increase in Purchases and Creditor

Therefore, the double entry should be:


  DESCRIPTION DEBIT CREDIT



   Purchases (Goods)   $3000



               Creditor (Mr. Z)   $3000