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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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