Double-entry Accounting System

4.3.9 Analysis of cash revenue transaction

Event No. 9. On June 31, 20X6 Huske's Consultants represented Mr. Debret (a client) in the court, for what the company received $700 cash. The increase in assets (Cash) is recorded as a debit. The increase in equity (Consulting Services) is recorded as a credit:

Illustration 4-18: Effect of cash revenue in T accounts

Assets	=	Liabilities	+	Equity
Cash				Consulting Revenue
Debit (9) + 700					Credit (9) + 700

This is an asset source transaction:

Illustration 4-19: Effect of cash revenue in the horizontal model

Assets	=	Liabilities	+	Equity	Rev.	-	Exp.	=	Net Inc.	Cash Flow
700	=	n/a	+	700	700	-	n/a	=	700	700	OA

4.3.10 Analysis of cash investment transaction

Event No. 10. On June 31, 20X6, Huske's Consultants loaned Jak Building Company $3,000. Jak Building Company issued a 1-year, 8% note. The transaction acts to increase one asset (Notes Receivable) and decrease the other (Cash). An increase in Notes Receivable is recorded as a debit, and a decrease in Cash is recorded as a credit:

Illustration 4-20: Effect of cash investment in T accounts

Assets				=	Claims
Notes Receivable	+	Cash
Debit (10) + 3,000			Credit (10) - 3,000

This is an asset exchange transaction:

Illustration 4-21: Effect of cash investment in the horizontal model

Assets
Notes Receivable	+	Cash	=	Claims	Rev.	-	Exp.	=	Net Inc.	Cash Flow
3,000	+	(3,000)	=	n/a	n/a	-	n/a	=	n/a	(3,000)	IA

4.3.11 Analysis of furniture purchase transaction

Event No. 11. New furniture was required for the recently rented office (Event No. 6). On June 31, 20X6 Mrs. Huske paid $2,000 cash to purchase a new table and several chairs. The office equipment is expected to have a useful life of 2 years and a salvage value of $400. The purchase acts to increase one asset account (Office Equipment) and to decrease another (Cash). The Office Equipment account is debited and the Cash account is credited:

Illustration 4-22: Effect of furniture purchase in T accounts

Assets				=	Claims
Office Equipment	+	Cash
Debit (11) + 2,000			Credit (11) - 2,000