 Hello in this presentation, we will be recording transactions related to cash We're gonna take this data down here listing the activity that is happening all activity all a through f will involve Financial transactions that deal with cash in one way or the other. We will generalize those transactions here It's good to get used to the terminology as we start to work with Journal entry we're gonna start learning the debits and credits of course Also, we need to know what a journal entry is. We typically call this the general journal just this piece of paper Basically this Excel sheet. That's where we are going to put the journal entry The process of recording the journal entry is called Journalizing the journal entry and then we are going to post the journal entry to this worksheet Now this is not to the general ledger We will be recording the general ledger at a later problem This problem is a worksheet designed to give us a quick idea of the activity that will happen and the effect on The accounts and the accounting equation through this quick worksheet we will then work similar problems at a later time and post to the general ledger and then create the trial balance as is often a typical problem for Accounting and you know learning the debits and credits, but this worksheet when there's relatively few debits and credits Really helpful to understand what is happening to particular accounts So we're gonna take this information We are gonna record the journal entry here post them to this blue area in the center column What that will do is it'll take this beginning balance and it will then take the the entries and Provide us with the ending balance This over here is called a trial balance So we have a trial balance and that's gonna list the chart of accounts. So we've got assets in green Liabilities in orange. We have the equity in the light blue and then the revenue accounts revenue and expenses in dark blue Remember that a trial balance will not typically be colored in this way But it will always remain in balance and the I mean it'll always be in this order meaning all trial balances And all chart of accounts typically will be in the order of assets then liabilities then equity then revenue then expenses that's a great thing to have because it really gives you an idea of Where accounts fall meaning if we don't know where a particular account is whether it's an asset liability equity income or expense account a Trial balance will give us that ideal give us that information for example if I just had unearned revenue over here Someone gave us the account unearned revenue and I didn't know whether that was an asset liability owners equity income or expense account However, I had a list of accounts chart of accounts or trial balance I could then find that unearned revenue and say hmm. It's next to the other payable payable here Meaning it looks like a liability account just by where it's grouped now We don't have any any amounts in the trial balance here yet But as we do get amounts in the trial balance the trial balance will also be a great Way for us to know what the normal balances of an account are So given that let's start to record this information Also note before we record this information that we're gonna have the accounting equation will be calculated Atop for the total at the end of our process and we're also going to record the effect on the accounting equation Over here with regard to each individual transaction. So let's scroll down first activity a says owner a deposits cash into the business checking account 130,000 now we're gonna go through our thought process of asking first is cash affected Of course cash will be affected for all of these Journal entries because we're focusing in on cash But we want to get in the practice of learning this thought process again The thought process will get us moving it'll give us started in a direction And it'll also prevent us from making common errors and learning rules that don't always apply It'll also prep us for working more complex journal entries at a later time So first question we're gonna ask is cash affected and of course it is in this case the cash is going up for the business Going down for the owner but up for the business then we're gonna ask well Cash has a normal debit balance as an asset and therefore we need to make it go up in order to make something go up We do the same thing to it as it's normal balance which in this case is another debit So I'm gonna copy this cash I could just type it over here But I'm gonna copy it and rather than pasting it just normal like this which would change the color of the cell I really just want to see the value So I'm gonna paste the values only like this and again We could just type it in there But that's I'm gonna get used to get the practice in on copying and pasting and then I'm gonna type in what we know I know it's gonna be a hundred and thirty thousand debit Now I'm gonna represent the credits. I know I'm gonna have a credit of some kind of 130,000 I'm gonna go ahead and type that in there and put the information down as we know it I'm gonna represent credits with a negative number. This could start to be confusing at first I'm gonna put in a negative one hundred and thirty thousand no commas no brackets Then when we select enter it will put the brackets and the comma there due to the formatting in Excel Note that many texts will not actually put the credits with brackets But in practice this will often happen within different softwares and within Excel The reason I'm gonna start using brackets is because functionally it's really useful to do and when you get into practice There's often situations where it's gonna be very useful to do it will also really help to simplify our worksheet over here And so I hope to convince you that it's worth learning the brackets here no matter what we do We're gonna have this problem of trying to differentiate What is a debit and credit and what are the operations of adding and subtraction and we have to differentiate that even when and while we are using adding and subtraction in order to Move the numbers around in the format of debits and credits So there's no way to get around you having to understand that and putting The credits without brackets is isn't gonna solve the problem in in in that and therefore We're gonna we're gonna use the brackets and that'll also simplify our worksheet So we'll show that in time So what's the other account is all we need now in order to complete this first journal entry Who put the money in to the business the owner did and therefore we're looking for an owner's equity account Those are gonna be the light blue accounts. It's in order assets liability equity So here's the equity account now all I need to do is copy that I'm gonna right-click and copy this I'm gonna put that in cell B6 Right-click and paste it once again not the formatting just the values and Again, we could type it in there But I'm gonna go ahead and copy and paste it to practice the copying and pasting Note that we already know it's gonna be credited due to the debiting of cash And that's the reason for always thinking about cash first or at least one of the reasons And so we already know we're gonna credit this owner equity owner capital, which is an equity accounts Now we want to think through though is that case? Why is that the case and double-check our work by answering why that is the case? So we know that the capital account here has a normal credit balance if we were to look at it at a cheat sheet We see normal credit balance for capital accounts And it should be increasing due to the fact that the owner put more money in and then therefore is owed more money The way to increase something is to do the same thing to it which in this case would be another credit So we're gonna credit the account which will increase it that does make sense looks correct Just for formatting I'm also gonna indent the second account and the way to do that in Excel or one way to do it At least is to go to the home tab go to the alignment group and then use this increase indent item here Okay, so increase indent. I think it's locking the cell to not do that Hold on so that that function is not working with a protected worksheet And I'm gonna try to protect the worksheet in order for you to not actually delete some some cells that you don't want to delete and Therefore, I'm gonna go ahead and double-click and indent with the space So I'm gonna do the spaces like that double-click on it and space three times Went in a new Excel worksheet You could then use this indent function and that is the way I would suggest doing it most of the time Okay, so now we're gonna go ahead and post this so this is the process of posting However, we're not posting to the general ledger, but just posting to a worksheet for now So this is the first cash account. It's gonna be the first account on the trial balance I'm gonna go here in cell G5 and say equals I'm always gonna use formulas here because I the formulas will help us to tie out what is happening so I'm gonna say equals and then I'm gonna point to this 130,000 and enter and that will increase our cash in the debit direction by 130 to 130 Put us out of balance by 130 meaning we have a debit with no related credit Therefore out of balance here and out of balance in the ending balance here We're then gonna post the other side owner capital. Here's owner capital So we're gonna go into our entry column. It starts at zero Of course, we are in cell G10 and I'm gonna select equal to to point to this cell And I'm gonna pull it over with a formula when we select enter then we're gonna see that credit represented by a negative number 130 here put us back in balance here and That's what we'll have here. So we have the 130,000 increasing in the credit direction now It's important to note that we're representing debits and credits here with a positive number or non-bracketed number and a negative number or a Bracketed number not having two columns by doing so we can use a formula that will then say Give me the total debits Minus the credits if they are equal then debits minus the credits will then equal zero So we know that the the debits equal the credits by the fact that the debits minus the credits equal zero The reason that's really going to be useful here is that it really eliminates a lot of more complicated formulas And it gives us some good information Meaning if we were to have two columns for each of these rows We would have a worksheet with six columns And we would then have to take row one minus row two to verify or check each of these You there'd be six columns. We would have to check to see if all six had pairs of two Which were all in balance so hopefully you see that this is really going to simplify the process over here We got debits and credits debits on the left credits on the right and credits represented with bracketed numbers Over here, we're going to just have debits with positive or non-bracketed numbers Credits with bracketed numbers and show the balancing effect through the debits minus the credits equaling zero We also see that net income is calculated here And there's nothing in that net income at this point not affected because no revenue or expense accounts have been impacted as of yet Then we're going to move over to our accounting equation And we're going to try to see what happened now It already gave us this one this time because it's the only transaction so the totals we can see that assets are increasing and equity is Increasing, but that's the case here. We're going to say that that the cash went up cash is an asset It is increasing or just select the drop-down increase Liability nothing's happening in the orange accounts. No effect and Then the equity section it's going up in the credit direction So remember this is a credit doesn't mean it's going negative in the whole It's saying that it's going up in the credit direction. So I'm going to say this is a credit and It's increasing Next transaction we see B says receive cash from clients for work 13,000 So our first question as always is is cash affected and of course in this case It is all the transactions in this problem will have cash affected is cash going up or down and the keyword here being Received therefore cash is going up. So we're going to increase cash We know that cash has a debit balance We can see that by it being represented without brackets in order to make any accounts go up We do the same thing to it which in this case would be another debit. So I'm going to copy the cash account And I'm going to put the debit on top note the debits always go on top. So I'm going to put the debit on top That's just a matter of convention So there's the debit and the amount then being 13,000 so I'm not going to put any commas or anything like that just the 13,000 there We have it. I know then that if there are only two accounts affected, which there are we will then also have a credit of some account of the dollar amount of negative or credit 13,000 again, I'm representing them with negative numbers or credits for formula purposes and There we have that it is a common way to do that And then we just need to then find out what this account is that we will then be crediting Receive cash from client for work done So the reason we got money as will be the typical reason for getting money is because we did work Once we know that the only question is when did we do the work? Did we do the work in the past and therefore are collecting a receivable or did we do the are we going to do the work in the Future meaning we got money and haven't yet earned it unearned revenue or have we done the work at the same time? Meaning we did the work and we got paid at the same point in time. That's the case here So we did work we got paid at the same point in time This would be a typical case for like if you know many times if you're thinking about food vendors or something like that They typically perform the work provide the food at the same point in time that they've received payment And therefore would be debiting cash and crediting revenue at that point in time as we are doing here I already know that we're going to credit revenue due to the fact that we debited cash That being the reason that we start with cash. I'm going to copy the revenue or expense Right-click and paste it one two three values only I'm going to double-click on it now and I'm going to try to indent one two three and again If the cell wasn't locked then I would go ahead and the alignment group in the home tap and increase indent in that format Now that we know that we're already going to credit revenue It's good to double-check our work and say well does it make sense that we're crediting revenue? We only credited it because we debited cash does it make sense that that is the correct thing to do and of course we know if we look at our cheat sheet we know that revenue has a Normal credit balance and it's also good to start to memorize that revenue and and expenses all income statement accounts These accounts down here only go up revenue only goes up in the credit direction So if we know that revenue has a credit balance and we know that it's going up We know that we're going to have to do the same thing to it as its normal balance, which in this case is a credit So we kind of double-check our work in our mind to see that that is true that that's going to be a credit Otherwise, we're just basically being dependent on what's happening in cash And we're not fully understanding why we're posting this credit to Income or revenue so that'll get the job done But it won't give us the full understanding to get the full understanding and provide a double check You then want to basically go back in here and ask yourself those questions Does it make sense that we are crediting revenue? Even if we had not known that cash was being debited now, we're gonna go ahead and post this out So this is the journal entry that we recorded or journalized in this whole sheet being the general journal We are now posting not to the general letter ledger as we will do later But to a worksheet and there's first count. It's gonna be cash Now I'm gonna post it to the center column, but there's already something in cash So we're gonna post a bunch of different things to cash. I can see what's in cash up here It's C5 and what I want to do is add to that the way to do that is I'm gonna double-click on it I'm gonna go to the end of the C5 and I could see that reference here I'm gonna say plus and then point to this 13 So it's gonna be C equals C5 plus C8 and enter So we basically just took the 130 plus the 13 giving us the 143 Now if anything gets messed up and you just delete this cell you can do the whole thing again I'm just gonna say equals. I want this cash number. I'm just gonna point to it that number Plus this cash number. I'm just gonna point to it that number and then that'll that'll give us that number So that increased the cash in the debit direction, then we're gonna record the other side which is revenue Here's revenue starts at zero. We are gonna record it in cell G 11 so I'm gonna say equals and then point to this credit That's gonna take it from zero up in the credit direction to 13,000 credit Put us back in balance and it'll make net income go up in the credit direction. So there we have that We know that we are in balance both in this column and this column Given that the debit of cash Minus the credit of capital and revenue is zero and we know that net income now is going up by the 13 Or we have net income of 13,000 for this time period that being revenue minus expenses This is a negative number to excel But is a credit to us and that's something we just got to kind of understand This is representing a credit in terms of debits and credits Minus what will be the debits to expenses Providing us with a quick calculation of the net income here Credits beating the debits meaning we're talking about net income rather than net loss We're then gonna go over here to our accounting equation We can see that our accounting equations in balance up here meaning the assets equal the liabilities plus the equity That's for the total we want to see what happened to the accounting equation at this time We know that cash went up so cash went up cash as an asset assets went up So I'm gonna say increase there. Nothing happened to liabilities. No orange accounts have been affected And we know that the revenue went up revenue and remember is part of equity So if I take the total equity which was this 130 it went up by this 13 in the credit direction Also, note that revenue or the equity section will always go up in relation to what happened to net income Net income went up by 13,000 equity. Therefore goes up also by 13,000 so I'm gonna say that is gonna be an increase and there's the effect on the accounting equation Next we'll take a look at transaction C paid cash to employees for $780 First question as always is cash affected and of course it is Then as all these accounts will be they won't be later on when we work another problem But most of them will still have cash affected. That's why we're gonna concentrate on cash first And the next question is cash going up or down in this case It's going down because we paid keyword of course being paid and therefore we're gonna decrease cash Now cash has a normal debit balance represented by the fact here that it does not have brackets How do we make something go down? We do the opposite thing to it as it's normal balance Therefore the opposite thing of this debit here would then be a credit. We're gonna credit cash Now note that this is the first time that we started thinking about cash And the first thing was a credit rather than a debit and credits typically go on the bottom So I'm gonna copy cash and I'm gonna put it on the bottom. So here's C I'm gonna put it on the bottom here right-click and paste it one two three now when people first learn The accounting transactions this oftentimes seems unusual meaning I'm starting over here with something that's gonna be on the bottom rather than starting with the debit first negative 780 credit and Because of the convention of debits always going on top People tend to think that they need to work from you know left to right top to bottom as is normal the convention for reading But it would be easier for us to construct a journal entry by constructing what we first know and that's why I recommend focusing in on Creating the journal entries using what we know first rather than creating the journal entry just based on convention of Putting the debits on top and the credits on the bottom Also note that when we get to more complex journal entries This will be a lot more easy for us to think about and will oftentimes actually Deviate from the convention When we need to in order to construct more complex journal entries for example when we sell inventory We often break a typical invent a typical journal entry into two journal entries and in order to post something That makes more sense to us so I would think of this convention as something We want to follow as much as possible unless it makes more sense to us to read what we have done to break from convention One reason this convention is here I would think of it as something that is needed for like computer code if I was to write computer code For debiting and crediting we would need to tell the computer that either debits and credits always go on top But if we're not writing computer code and we're working in an auditing department or doing some other type of transactions It makes more sense many times to put the debit and credit in the order that we can best go back and read Or someone else can go bets that go back and read and then understand So I'm gonna therefore put the credit on the bottom gonna dump I'm gonna put three spaces here. We then know that we're gonna debit something So therefore I'm gonna put on the top a debit of something So we have an equal number of debits and credits and then just need to know what other account is affected here That other account being something to do with employees being paid So if we look at our chart of accounts, we can see that we have something wages expense That would make sense. It's an expense. So I know that we are always gonna We are already have debited that account and now I just need to put the account name So I'm gonna copy this and I'm gonna put it in cell B. 11 right-click and paste 123 We already know of course that we are going to debit the expense account because we credited cash that being the purpose for Starting with cash because it's a lot easier for us to know which direction the cash is going Then the direction that the expense will be going now that we have posted this However, we want to double-check our work. So we want to think well What if I didn't know cash was was going up? What would happen to the expenses and that will double-check our work? We know that expenses if we look at the normal balance for expenses they are debit balance accounts and We also know that all income statement accounts. It's useful to remember only go in one direction meaning revenue only goes up in the credit direction and Expenses only go up in the debit direction and net income therefore goes up when revenue goes up And goes down when expenses go up calculated as revenue minus expenses. So that means that if Expenses only go up and they have debit balances then we're gonna make it go up by doing the same thing to it Which is another debit so by thinking through that thought process We think through the reasoning for debiting the expense other than just debiting it because we credited cash And now it gives us a better idea of what expenses are and how they function Rather than just doing what we need to do Because we credit cash. So here we're gonna post that now. So here's the wages expense I'm gonna go down to wages expense here in cell G 12 select equals point to the 780 that will bring the zero up by 780 to 780 put us out of balance by 780 and it'll bring net income down So here we have that we have the increase in wages expense out of balance by 780 net income is going down By the 13 now which was what it was before minus the 780 note that this does not represent a loss It represents how much the credit balance of revenue is greater than the debit balance of expenses We will then post the other side to cash. So here's cash against something's in it already So we can see the formula C 5 plus C 8 if we double click on this cell We can see the formula again and we can see the highlighted cells We want to make sure that this Highlighter is on the end here before we do anything new the new thing we will then do is say plus adding This here and then point to the cell. So we want it to be Equals C 5 plus C 8 plus D 12 and enter that will bring this balance down And that also put its back in balance and there's transaction number C Now we'll go ahead and post this transaction see the activity to the accounting equation So we can take a look at assets. We know that assets We see that cash has gone down and therefore assets will decrease because cash is an asset and it went down So I'm going to say cash is going down assets are going to decrease No effect on liabilities against the orange accounts have no effect So we're going to say none and then the equity section. We said that expenses are going to go up They only go up in the debit direction that is going to bring net income down Also bringing the total equity down So total equity is going to go down We also know that it had to go down or decrease Due to the fact that the other side assets decreased and therefore it must then decrease as well Record transaction D says received cash for work that will be done in the future Once again going through our questions is cash affected We're going to say that it is affected and the keyword is Received cash therefore cash is going to be going up Cash has a normal debit balance represented by the fact that it does not have any brackets around it in order to make any Account go up. We need to do the same thing to it which in this case would be another debit So we're going to debit cash. I'm going to right click on cash copy cash I'm going to put that on top in cell B 14 right-click and paste 1 2 3 We will then go into cell C 14 and we're going to put the dollar amount that of 1900 1900 that's correct We also know that we're going to credit something for that same dollar amount We're needing to have a similar or same not similar, but the same amount of debits and credits So there we have that now. We just need to know what that account will be so now the question is why did we get? 19,500 and then we know we got it from a client for doing work The only question is then did we do the work in the past and therefore our should be reducing the receivable? Did we do the work at the same time and therefore should be recording revenue under the revenue recognition principle at this point in time? Or are we doing the work in the future as is the case here? We're going to do the work in the future so we got paid before we did the work That means that we owe work in the future and can't record the revenue at this point in time Because we can only record revenue under the revenue recognition principle a cruel principle when we have earned it And therefore we're going to put this to unearned revenue It's going to be a liability account. It's going to increase This is often a more complex concept for many people because not many businesses or many businesses do not Use unearned revenue very much meaning for example our last example if we were a food if we're selling food of some kind Typically, we will collect the revenue at the same time if we are a if we are a bookkeeper or a lawyer then typically we will actually do the work before we get the money and Some a case where we get paid before we do the work would often be something like a subscription like a magazine subscription Or many online types of subscriptions these days where we buy services and pay for the service up front for say software That software has not that software company has not yet earned the revenue until they provide the software in the future Until that time it's going to be a liability. So I'm going to copy unearned revenue and We will then put that in cell B 15 right-clicking and haste one two three We already know that unearned revenue will be credited due to the fact that we debited cash But now we want to double check that we want to think through that in our mind and see if that makes sense What if we didn't debit cash first? What if we didn't know what we're doing to cash? We just want to know what's going to happen to unearned revenue and once again We think about the idea of revenue is going to be a liability account liability accounts have credit balances and Unearned revenue is going up meaning liabilities are going up due to the fact that we owe something in the future We do not owe necessarily the cash in the future as is the case with most liabilities like accounts payable We owe money in the future in this case we owe services in the future We owe the work that we are going to do in the future and if we don't do that work in the future Then we would owe the money back So let's post. So let's go ahead and post this now. I'm gonna post the cash first Cash is up here in g5. Something is in it. Therefore. I could see the formula up here I'm gonna double click on it and make sure to go to the end of the formula and then say plus and point to that cash and So we see then that the formula will be equal c5 plus c8 plus d12 plus C14 again if something goes wrong and you accidentally delete this One you want you when you got the undo button, of course But then you also can say equals and just point to all the accounts that have cash related So we're gonna say this 130 that'll be c5 plus This 13 that'll be c8 plus and I'm plusing a negative number Note that this is a negative number So I'm adding a negative which will subtract it and excel this Plus and then I'm gonna save this cell and enter. So there we have that then I'm gonna post the unearned revenue Here's the unearned revenue. Here's the account. We will post it to and we are in cell g9 Equals point into the 19. This is gonna go up from 0 by 19 5 in the credit direction to 19 5 Notice I'm out of balance here, and I made an error up here I don't I'm gonna double click on this note that I put the credit here rather than the debit So you might have caught that so I'm gonna go ahead this this last transaction d15 I'm gonna delete that and it should be this 19 5 related to cash Not the credit related to unearned revenue that shows that we were out of balance by double the 19 5 Because I posted two Credits here. This should put us back in balance and there we have that All right, so there is that I'm gonna go ahead and post the activity to our Accounting equation cash went up cash is an asset therefore assets went up We see that unearned revenue is a liability Unearned revenue here is gonna go up. So I'm gonna go increase Unearned revenue and there's no effect on any of the blue accounts because the revenue was not yet earned and Therefore this is going to remain the same So no effect there Next we have e paid cash for Utilities once again our first question is cash affected and of course it is in this case Did it go up or down we paid cash keyword paid and therefore? It's going down. We know that cash has a debit balance and therefore to make it go down We're gonna do the well cash has a debit balance represented by the fact that it does not have brackets Anytime to make something go down. We do the opposite thing to it which in this case would be a credit So I'm gonna copy cash. I'm gonna put the credit again on the bottom so I'm gonna start with the credit because cash is gonna be an easier account to think about and Right-click and put that on the bottom The credit will be 975 so I'm gonna put in cell D 18 credit 975 Then we know that we're gonna debit something for 975 as well We just then need to know what that debit will be we paid for utilities So going back to our accounts we can look for something related to utilities and of course find utilities expense here Utilities expense then is gonna be the account that we need. I'm gonna copy that I'm gonna put that on top here in B B17 right-click and paste one two three Note that I could also indent these last two credits I'm gonna go back up here and B15 double-click and hit the space bar three times again This is convention. You don't really have to do this But it does emphasize the fact that we're to have a credit here double-click on B 18 before the C right-click or space bar three times and there we have that All right, so there's gonna be our transaction now. We already we can double-check then the debit to the expense here We know we're gonna debit the expense because we credited cash, but it's always good to double-check that We can see that expenses always have have normal balances of debits all expenses do and That we also know that expenses and all income statement accounts only go up Therefore revenue goes up in the credit direction Expenses go up in the debit direction. We we then are going to increase this utilities expense so we have a Normal debit balance to increase any account. We do the same thing to it as its normal balance Which would be another debit so that then is just double-checking the fact that we're gonna debit this account Understanding why we're debiting a utilities expense for the fact of what utility expense is rather than just debiting it because We credited cash providing us with that double-check. So now we're gonna post this. I'm gonna post first the utilities expense Here's utility expense here. Here it is on the trial balance Here it is on the trial balance. So we'll go to sell G 13 say equals and then point to this nine seven five that will bring this zero up by nine seven five to nine seven five Put us out of bounds by nine seven five and bring net income down by nine seven five So there we have that net income calculated as the 13 now minus the 780 Minus the seven nine five giving us that credits winning net income not loss of 11 to 45 Then we're gonna post the cash side. So here is cash here Here is cash here Something's in the cash account. Therefore, we're gonna double-click on it. Go to the end of it Say plus and then scroll back down and point to the cash I'm gonna scroll back up. We have to do a little scroll in there So if you want to just type it in there It would be equals C5 plus C8 plus D12 plus C14 plus D18 Once we do that, we should be back in balance Then we're gonna take a look and see what happens to the accounting equation We know that the cash is going down. Therefore, the assets are going down. So I'm gonna say Decrease in the asset. We know that the expense. Well, nothing's happening to the Liabilities neither of these counts being a liability account. Therefore liability none and We know that the expense is increasing which brought net income down when net income goes down It decreases total equity. So equity is going to be decreasing. So we have a decrease here We also know that equity would then decrease if assets on this side go up and the other side must be equity And therefore if that's what's being affected, it must then go down to remain in balance last transaction I'm gonna change this. This should be f put that there is gonna be paid cash for supplies Once again is cash affected first question question answer. Yes keyword paid cash is going down How do we make something go down? We do the opposite thing to it as it's normal balance normal balance of cash is a debit Represented without brackets here to make it go down. Then the opposite would be a credit gonna credit cash Copy cash gonna put the credit on the bottom as is the normal convention. Here's the transaction place We're gonna put it below F right-click paste one two three Amount and I'm gonna go ahead double click and indent one two three times the amount then in the credit Section is gonna be negative four five five and enter Then we know that we're gonna debit something for four five five And it's just a matter of what that debit then will be we paid for supplies So if we look at our chart of accounts, we see supplies up here. It's in the asset section You may be asking why it's not an expense and the reason is that it's gonna be our introduction to inventory meaning Under an accrual basis we have not yet consumed the supplies in order to help us to generate revenue and Therefore we're gonna put it on the books as an asset as something we will consume in the future When it is consumed and used we will then take it out of the asset and record the expense Record the consumption at the time of consumption. So we're gonna say supplies I'm gonna copy that and that's gonna be the debit right-click paste one two three We already know that we're gonna debit supplies due to the fact that we credited cash But we also want to double check that to understand better the supplies account and double check our transaction Therefore we can look at supplies and say it's an asset like cash and therefore has a normal debit balance we need to make it go up because we bought more supplies and The way to make something go up is to do the same thing to it as its normal balance Supplies an asset having a normal debit balance the same thing being another debit So we just double check that we're debiting that for reasons other than just having to credit cash So now we're gonna post this I'm gonna post the supplies first So we are in the supplies account gonna have to scroll up and down a bit. We are in G seven so I'm gonna say equals and scroll down a bit and Point to this supplies here If you don't if you're having problems scrolling then you can just type in equals sell D or equals C 20 and their supply increases for 55 puts us out of balance by 455 Cash then goes down by at 455. So I'm gonna scroll back up Here's cash something's in it. So I'm gonna double click on it. I'm gonna go all the way to the end we're gonna say plus and then scroll back down And go to this 455 and enter. So the cash account then This is everything that's in the cash account Equals C5 plus C8 plus D12 plus C14 plus D18 plus D 21 and that's gonna be highly you can also see that of course highlighting the cash accounts here So you could just point and click to all the cash accounts that puts us back in balance Then we can see what happens in terms of the accounting equation and this is a tricky one to the last one We know that cash is going down and cash is an asset So our typical response is to say well assets went down and then we say what way what happened was the other thing that happened Supplies also being an asset and it went up. So that means that really there's no effect on the supplies or The liabilities or the equity although we had a transaction here That being one of the main reasons that the use of debits and credits is often better For actually building this stuff then using the accounting equation Because it will provide a debit and a credit for each transaction rather than resulting like this does with With no effect on in the accounting equation So the debits and credits are really what have to be used in terms of they don't have to be used But they're the best tool by far when compared to the accounting equation to actually constructing the trial balance the trial balance Then will be used to construct the financial statements So now that we have the end product here We can really just basically see again We don't need the financial statements if we have this ending trial balance Formatted in this way to really understand a lot of what's going on this simple little format without an income statement Balance sheet and equity really tells us pretty much all we need and if we format it in this way with brackets with credited numbers We can we can really get a lot of information just from this this here for example If I want to know what total assets are I could just highlight this in Excel and Excel will add up total assets are 160,745 total liabilities obviously only one but we can highlight those nineteen five hundred they have credit balances That's typically not something that someone else would want to know But the credit balances help us to calculate this number if we want to know what the net income is We already calculated it here It's going to be the credit of 13,000 minus the debit of the expenses of 780 and 975 resulting in income not a loss credits beating the debits on the income statement of 11,745 if we want to know what the total equity section is We're just going to take the credit balance in the equity section the investment Plus the revenue minus the expense minus the expense meaning the credits are over the debits there are more credits than debits of for 141 to 145 and that's going to be the total equity portion or kind of like the book value of The organization at this point in time the business that same number remember that number 141 to 145 could also be calculated using the accounting equation of assets minus liabilities meaning the green accounts 160 plus the 455 160 to 90 plus the 455 minus their liabilities of 1,900 or the debits and assets minus the credits in live in liabilities resulting in 141 to 45 same number 141 to 45 all the blue accounts have a credit of 141 to 45 so note We can really get all the information we need from this format and if we use the brackets as as Credits, then it really simplifies the calculations to get more of what we need and a really condensed format That's the beauty of the trial balance We're going to then put this trial balance into a more extended format at a later time That format being the financial statements an actual longer kind of a more bulkier format But one that we can then use to provide to other people other people that don't understand debits and credits