When you’re a busy landlord using QuickBooks, you may just want to use QuickBooks and not have to think about journal entries, debits, or credits. And, generally the way we teach things, you can do that. However, sometimes it is very useful to think about transactions as Debits and Credits.
“Accounts” are just a collection of transactions that sum up to give a current balance. There are always two kinds of transactions that come into play: a debit or a credit. In the image above, you can see the shorthand notation used, a “T-account.” where debits are on the left and credits on the right.
It depends on the account type if a debit increases or decreases the balance
This is just the way accounting works. A cash account is an assets, and they increase with a debit; but liability accounts increase with a credit.
The example transaction below shows the two accounts involved in creating a loan. It increases your cash, and increases your liabilities.
In any given transaction the sum of all debits must equal the sum of all credits. Here 500 equals 500, perfect.
You can verify the deposit creates the equivalent Journal Entry by opening up the Petty Cash register and highlighting the transaction. Then click Reports > Transaction Journal. In the mac version the following opens up. It’s equivalent for windows or online.
Use this chart to help you remember if a Debit or Credit increases each account type’s balance.
Extracted from page 23 of our training guide, the below graphic is a quick reference when you need to make a Journal Entry. Consult it to review which account increases by a credit and which by a debit.
Read more about this is our free debits and credits excerpt from the eBook.
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