Question

Paid $4700 to creditors on account. Collected $12600 from customer billed on August 18. Paid $800 for utilities during August. What are the debits and credits for all three and how do you know?

Answer 1

Paid $ 4700 to creditors on account:

In this case creditor’s account is debited and cash is credited.

What goes into an account is debit and what is taken out is credit. Cash is taken out , hence cash account is credited. Amount of $ 4700 goes into customer’s account , hence it is debit.

Collected $12600 from customer billed on August 18:

In this case, Amount of $12600 is going out of customers account and going into cash account.

Hence, Customers account is credited and cash account is debited.

At the time of billing on August 18, goods were given to customer, hence customers account was debited at the time of billing.

In case of revenue accounts, all sales accounts are credited and all expense accounts are debited.

Hence, at the time of billing on August 18, Sales account was credited and Customers account was debited

Paid $800 for utilities during August:

Utilities payment is and expenses. Hence Utilities expense account is debited. Amount is going out , hence cash account is credited