S3U

Math / Money and accounting / Grade 7 / mb7j1

Two Sides of a Workshop Entry - Practice 1

Record what changed in a pretend workshop, then check both sides of its books.

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Watch the lesson | Try the alternate journal practice

5 questions0m 0s
Learn the skill

Debit means the left side of an account; credit means the right. Assets such as Cash and Equipment increase with debits and decrease with credits. Liabilities such as Loan Payable and the owner's Capital increase with credits and decrease with debits. Every entry has equal total debits and credits, across at least two accounts. These words do not simply mean good, bad, money in or money out.

Worked example

Separate example: an owner adds 60, equipment costs 20 cash, a loan brings in 15, then 5 of loan principal is repaid. Cash is 60 - 20 + 15 - 5 = 50. Equipment is 20, Loan Payable 10 and Capital 60. Assets 70 = liabilities 10 + equity 60. A repayment debits Loan Payable and credits Cash.

Separate worked example: the Cash T-account has debit entries 60 and 15, credit entries 20 and 5, and a debit balance of 50. Equipment 20 plus Cash 50 equals Loan Payable 10 plus Capital 60.
A credit can decrease an asset or increase a liability. Read the account type before deciding.

Your workshop records

Start with zero balances. J1: the owner contributes 100 cash. J2: the workshop borrows 40 cash. J3: it buys equipment for 30 cash. J4: it repays 10 of loan principal. All amounts are fictional dollars. Record equipment as an asset. Ignore interest, tax, depreciation and fees; no sales, expenses or other transactions occur. No real accounts or household information are needed.

Question 1 Which entry records J3, buying equipment for 30 cash?
Question 2 For J2, Cash is debited by how many dollars?
Question 3 After J1 through J4, how many dollars are in Cash?
Question 4 After J4, how many dollars remain in Loan Payable?
Question 5 Why does the debit in J4 reduce Loan Payable?