In: Accounting
Name 5 accounts with NORMAL BALANCE on the Debit side
Name 5 Accounts with NORMAL BALANCE on the Credit side
Use two accounts in a journal entry to illustrate with explanations.
For example, normal balance of Cash account is Debit and normal balance of Loan Payable is Credit.
ABC Company borrowed from Bank of America $50,000. After ABC Company signs a Promissory Note, Bank of America would give $50,000 cash to ABC Company.
ABC Company would enter Journal Entry in its books as follow:
Debit Cash (To Increase Cash) and Credit Loan Payable (From not owing, now ABC owes $50,000. So it needs to Increase Loan Payable)
Normal Debit Balance | Normal Credit Balance | ||||||
1 | Machinery | Notes Payable | |||||
ABC Company bought a Machinery from PQR Company and issued a 9% Note of $100,000 | |||||||
So ABC company has to debit Machinery by $100,000 and Credit 9% Notes Payable | |||||||
2 | Merchandise Inventory | Accounts Payable | |||||
ABC Company bought Materials from PQR company on credit, it means that ABC has to debit | |||||||
Merchandise Inventory and credit Accounts Payable. | |||||||
3 | Accounts Receivable | Sales | |||||
ABC company sold goods to DEF company woth $10,000 on account. SO ABC company has to create | |||||||
Accounts Receivable account of $10,000 and credit sales account to recognize sales Revenue | |||||||
4 | Cash | Common Stock | |||||
ABC company issued common shares 5,000 stock at par value of $10. So ABC company will receive | |||||||
an amount of $50,000 cash which will be debited and credit Common Stock which shows that the company | |||||||
has issued shares of $50,000 | |||||||
5 | Cash | Bonds Payable | |||||
ABC company issued 5% Bonds worth $500,000. So ABC company will receive | |||||||
an amount of $500,000 cash which will be debited and credit Bonds Payable which shows that the company | |||||||
has issued Bonds worth $500,000 | |||||||