Balances in Accounts
- Assets and Expenses will always have a Debit balance
- Liabilities, Income, and Capital will always have a Credit balance
Example:
Transactions
- Jan 1 - Started Business investing £15,000 Cash
- Increase Asset - Debit Cash at Hand
- Increase Capital - Credit Capital
- Jan 2 - Transferred £10,000 Cash into a Bank account
- Decrease Asset - Credit Cash at Hand
- Increase Asset - Debit Cash at Bank
- Jan 4 - Bought a Motor Vehicle £2,000 paying by Cheque
- Decrease Asset - Credit Cash at Bank
- Increase Asset - Debit Motor Vehicles
- Jan 6 - Bought Goods on Credit from Black £600 and White £1,300
- Increase Asset - Debit Purchases
- Increase Liability - Credit Black
- Jan 10 - Cash Sale of £325
- Increase Asset - Debit Cash at Hand
- Increase Income - Credit Sales
- Jan 14 - Returned Goods to Black £50
- Decrease Liability - Debit Black
- Decrease Asset - Credit Return Outwards
- Jan 15 - Sold Goods on Credit to Blue £840
- Increase Asset - Debit Blue
- Increase Income - Credit Sales
- Jan 20 - Bought Fixtures £300 by Cash
- Decrease Asset - Credit Cash at Hand
- Increase Asset - Debit Fixtures
- Jan 22 - Paid Electricity £500 by Cheque
- Decrease Asset - Credit Cash at Bank
- Increase Expense - Debit Electricity
- Jan 25 - Blue Returned Goods £100 to the Business
- Increase Asset - Debit Return Inwards
- Decrease Asset - Credit Blue
- Jan 27 - Paid Rates £45 Cash
- Decrease Asset - Credit Cash at Hand
- Increase Expense - Debit Rates
- Jan 29 - Owner took £75 Cash for Personal use
- Decrease Asset - Debit Cash at Hand
- Decrease Capital - Debit Drawings
- Jan 31 - Paid White by Cheque £800
- Decrease Asset - Credit Cash at Bank
- Decrease Liability - Debit White
Trial Balance
A Trial Balance is a statement, which is prepared to check the arithmetic accuracy of the double entry. It is a list of the balances that remain in the books at the end of every month.
Example for above Transactions:
