Recording Transactions
A journal entry is the first step in the accounting cycle. Each entry records a business transaction by listing the accounts affected, whether each is debited or credited, and the dollar amounts. Debits are listed first, credits are indented below.
Purchasing Equipment on Credit
Your company buys $10,000 of equipment, paying $3,000 cash and financing the rest.
Debit: Equipment $10,000
Credit: Cash $3,000
Credit: Notes Payable $7,000
Always verify: Total Debits ($10,000) = Total Credits ($3,000 + $7,000 = $10,000). If they don't balance, something is wrong.