 and the credit the only question being what will that debit be so pay cash for miscellaneous expense so uh we don't know what miscellaneous expense is and obviously in real life we would like to categorize things as much as possible but to keep this problem simplified we're going to limit the amount of expenses now where are the expenses we have assets then we have liabilities then we have equity and we have revenue and then we have expenses down here so expenses are at the bottom and we're going to put miscellaneous expense at the bottom in this case so here we have miscellaneous expense expenses basically are debit balance accounts and they only go up they're basically only going to be debited in stuff except for rare cases that we'll get into at a later time so we're always going to debit an expense because they always are debit balance accounts and they go up we knew we're going to debit it because we credited cash so let's copy this i'm going to copy this i'm going to put it in cell c11 so there's c11 you see that one and c11 right click and paste it one two three and there we have that so now we can go ahead and post this out so we're going to post this to the general ledger this is called posting the general journal to the general ledger and we're looking for miscellaneous expense that's going to be way over here so i'm going to make this a little bit smaller like cell and we're going to go way over to the end miscellaneous expenses way on the end and it's down here it's going to be in the debit so it's in column a m 21 now why is it a m because once you get past column z then it starts at a a a b a c blah blah back to a m so that's how the number and system is going to work so we're on a m 21 i'm going to say equals and i'm going to hold down the left arrow i'm going to hold it down until i just hit the wall over here and then i'm going to go find that 400 debit we're recording this 400 for miscellaneous expense in the general ledger for miscellaneous expense when i hit enter and that puts me back over here and we went from zero up in the debit direction to 400 and we can see that 400 then on the trial balance should record automatically over here there's the 400 there put us out of balance it made net income go down so this is the first time net income is affected meaning we have revenue minus expenses there is no revenue and we only have expenses therefore we have basically a loss in this case of 400 all right so then the cash uh is going to be the other side of that so cash we know is right here's nice and handy we can see that in cell p 11 so we're going to say equals in p 11 and scroll over here to notice i'm using the arrows now and i'm pointing to the cash credit in cell e 12 when we hit enter because this is a credit and cash is a debit balance account they're the opposite therefore it goes down from 29 to 228 8 all right so we're gonna go back see the next transaction gonna make this a little bit larger once again and we are now on uh i'm gonna skip a line on 5 13 so 5 13 then says vendor uh paid vendor for part of the debt incurred in the prior month recorded as accounts payable okay so we paid the vendor so once again is cash affected that's going to be the question and in this case it is it doesn't say cash this time but we paid something and i'm assuming we paid it with cash now cash doesn't include checks and whatnot so checks are part of cash for this problem so cash is a debit balance we need to make it go down how do we make something go down we do the opposite thing to it as what it is cash is a debit represented by the fact that it doesn't have brackets so we're going to credit it because that's the opposite thing to it in order to make it go down so i'm gonna right click copy that here's the date line i'm gonna put my cursor under that in cell c 15 because the credits go on the bottom i'm gonna right click gonna paste it one two three values only i'm gonna go in the credit column on the general uh journal worksheet and put a negative to represent the credit and the amount will be for 500 when we hit enter the format of the cell will change it to have brackets i'm gonna if we credit something we're also gonna have to debit something so i'm gonna be up here in cell c 14 and put the 500 in there as well so there's the debit side there's the credit side the only thing we don't know at this time is what the credit account will be and we recorded services provided but for which cash had i'm sorry we're up here paid vendor for part of debt incurred so we paid the vendor but we didn't get anything today we got something sometime in the past so we have an i o u basically out there to our vendor uh the account that represents an i r u is a liability it's called accounts payable so accounts payable represents the money that we owe to somebody else in this case 800 dollars we're paying 500 of it we see that it has a credit balance we're paying it off therefore it should go down because we don't owe it anymore we make something go down by doing the opposite thing to it ask what it is that's a credit represented by the brackets we already know that we're going to debit it because we credited cash that makes sense that will make it go down because it's the opposite of what it is i'm going to go ahead and copy the accounts payable put that on the top of this journal entry right click and paste it one two three all right so we're going to post this out i'm going to scroll over here a little bit so we can see more of our screen i'm going to make this a little bit smaller like so and then let's post this out so we're going to look for accounts payable so accounts payable is over here we're going to be in the debit side in this case so i'm in cell a nine so a nine i'm going to say equals i'm going to take my cursor and point to the 500 and then when we hit enter the 800 will go down by 500 to the 300 that 300 then will also be over here on the accounts payable for some reason it's the same as the receivable that's just the coincidence and but there's the 300 and we are out of bounds by 500 now so now we're going to post the cash side of it so if we go to the gl and cash and then we go down here to the cell o 12 i'm sorry we're going to go down to p 12 going to post it as a credit because it's in the credit column we're going to say equals and then i'm just going to point to that cash number and it has e 15 in it then when we hit enter it will go from 288 down to 283 because it's a debit bounce and we did the opposite thing to it which is a credit all right let's make this a little bit larger once again and keep posting these out we're going to go down to the next transaction which happens to be in this case on 5 15 so on 5 15 we have recorded services provided but for which cash has not yet been received okay so we've seen that before i believe so we did we've recorded services but we haven't done that yet anyway so we did work but we didn't get the money yet so then the question again is is cash affected and in this case we're going to say no we recorded work we did work but we have not yet received cash so we did work we're going to send out the invoice basically saying hey we did work pay us but we haven't got the cash yet so what did we get instead we got kind of an iou when we do the work we say we earned the work people owe us money so the asset that we have is an asset in this case it's basically means that it's an iou we did the work people owe us money as of the time the work is done and we can see that the uh iru account the account receivable has a debit balance we need to make it go up people owe us more money so i'm going to go ahead and debit that do the same thing to it just like if we got paid with cash we're getting paid with an iou in this case so i'm going to right click copy that i'm going to put that on the top right click and paste it one two three so that's going to be for the amount of in this case seven five if we debit something we will also have to credit something so i'm going to be over here in column in cell e 18 e 18 i'm going to put a negative seven five oh and once we hit enter that will put the brackets around it because of the formatting of the cell and now we just need to know what that credit account will be and the credit will be in this case finally revenue we earned the revenue so basically anytime we do work we earn revenue revenue only goes up so whether we get paid cash or not when we do work under an accrual basis we will record an increase in revenue revenue has a credit balance so revenue has a credit balance we're going to make it go up by doing the same thing to it which is another credit revenue will always go up for the most part if we do work revenue will go up net income can go down but revenue generally just goes up so i'm going to go ahead and right click that i'm going to copy it i'm going to put our cursor on c 18 right click and paste it one two three just the values only so then we're going to go back over here and we're going to make this a little bit smaller again and see if we can post this out so we're going to go to the receivables account so here we have receivables in cell s 10 we're posting this receivable in cell s 10 under the accounts receivable general ledger this is called posting to the general ledger going to say equals going to point to that 75 and that 300 once we hit enter we'll go up to 78 by the 75 that we have now posted into the accounts receivable then we're going to go to the revenue that's going to be the blue accounts so i'm going to go over here a little bit further to the blue over here here's the uh the revenue account so i'm in cell af 19 af 19 so remember it goes to z and then goes a a a b and whatnot we're going to say equals in the cell i'm going to hold down the left arrow instead of using the mouse this time it's going to hold down the left arrow till i hit the wall and then i'm going to go to that last entry that i'm in and i'm looking for the revenue and i'm just going to go to that cell uh which is e 18 and then go ahead and hit enter and it will make the account go from zero up in the credit direction to 75 where else will we see that 75 we see it on the trial balance so there it is on the trial balance right here and now that's revenue revenue went up so what happened to net income we can see it right here on our trial balance the revenue of the 75 minus the expense of the 400 means we have income of 71 now that 71 is income it's not a loss even though it has brackets around it and excel sees as a negative number we see it in terms of debits and credits as the credits are beating the debits therefore we have income of 7001 in this case as of this time all right so i'm going to make this a little bit larger once again we're going to go down to the next item which happens to be in this case 517 where it says that cash received from clients for revenue earned during this month all right so we did work and in this case what we're trying to say there is we did work and we got money in the same time period or within the same month and so uh we want to record the revenue and the cash in this time period at this time so first question is cash affected yeah in this case cash is affected because it says we received cash cash is going up cash is debit balance i would make something go up we do the same thing to it as what it is which in this case would be a debit so i'm going to right click going to copy that i'm going to put that on the top so i'm in cell c20 right click haste it 123 then we're going to put that in the debit column i'm in this cell here so the amount will be 71 then we need to credit something for 71 because we have to have an equal number of debits and credits with every journal entry so i'm going to put a negative to represent the credit of 71 and when we hit enter that'll put brackets around it you will need to put the the negative sign in this type of excel worksheet in order for the formulas to work in the most efficient way then the only question is what should this account be so uh cash received for revenue earned so we earned revenue so why do people pay us cash because we earned revenue we earned it in this time period in this case we can see the revenue accounts always going to be in order assets then liabilities then equity then revenue revenue has a credit balance it only goes up how do we make something go up we do the same thing to it as what it is therefore we're going to make another credit so i'm going to copy this i'm going to paste this in c21 right click paste it 123 nope we already knew we were going to credit it because we debited cash all right so then we're going to post this out i'm going to make this a little bit smaller again so we can see some more of the general ledger this is the general journal which we will now post to the general ledger which will then automatically update the trial balance all right so we're going to go over here to cell 013 and we're going to say equals and i'm going to point to the cash number there and once we hit enter the 283 we'll go up in the debit direction to 354 we are now of course out of bounds by the 71 until we record the credit we're out of bounds here we're out of bounds here and then we will go over to the revenue so revenues wherever you remember it's in terms of assets then liabilities then equity and then revenue is down here revenue is always going to be a credit so i'm in the credit column i'm in cell af 20 in this case we're going to hit equals and this time i'm going to hold down that left arrow again i'm just going to hold it down and note the number of changes every time i go that's fine until i find the one that i want which is that credit of 71 then i'm going to hit enter and it takes the revenue account from 75 up to 14 6 because we did the same thing to it as what it is we can see that 14 6 on the trial balance as well what's the effect on net income well net income went up so now net income is 14 2 which is that 14 6 revenue what we earned less the miscellaneous expense of 400 at this time all right next transaction i'm going to make this a little bit larger on the task bar down here and we're back to 100 percent we're going to go down to 5 20 where we have purchased of supplies on account no cash is paid so is cash affected and the and the answer is no we purchased it on account so many times if a book says it says we purchased it on account we got to kind of know the terminology obviously here we also said that the cash wasn't paid so you can kind of think of that as we purchased it maybe similar to being on a credit card or something like that we didn't pay cash we have an iou in the future if you see the terminology of on account it's probably going to mean i uh accounts receivable or accounts payable