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10 Example of Double Entry Accounting (with Debits & Credits)

➡️ What is Double Entry Accounting?

Pretty much the foundation of Accounting - it shows how every transaction affects a business in 2 areas

This is often times summarized via Debits & Credits, which are used to explain increases/decreases across different accounts

➡️ What are 10 examples?

1️⃣ Investing money in a business

Debit Cash (Asset) ⬆️

Credit Common / Preferred Stock (Equity) ⬆️

2️⃣ Generating a sale - cash basis

Debit Cash (Asset) ⬆️

Credit Sales ( Revenue) ⬆️

3️⃣ Generating a sale - accrual basis

When cash is collected:

Debit Cash (Asset) ⬆️

Credit Deferred Revenue (Liability) ⬆️

When products/services are rendered:

Debit Deferred Revenue (Liability) ⬇️

Credit Income (Revenue) ⬆️

4️⃣ Purchasing legal services via AP

Debit Legal Expense ⬆️

Credit Accounts Payable ⬆️

5️⃣ Purchasing a 12-month subscription

Debit Prepaid Expenses (Asset) ⬆️

Credit Cash (Asset) ⬇️

6️⃣ Converting inventory to COGS

Debit Cost of Goods Sold ⬆️

Credit Inventory ⬇️

7️⃣ Recording an accrued expense

Debit expense account ⬆️

Credit Accrued Expenses ⬆️

8️⃣ Depreciating a fixed asset

Debit Depreciation (Expense) ⬆️

Credit Accumulated Depreciation (Contra-asset) ⬆️

9️⃣ Paying off debt

Debit Debt (Liabilities) ⬇️

Credit Cash (Asset) ⬇️

🔟 Paying employees

Debit Payroll accounts (Expense) ⬆️

Credit Cash (Asset) ⬇️

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