Online Business Accounting

Accounting Question, Basic Journal entry?

Suppose you have this: 9/15 Expenses Debit 1000 Cash Credit 1000 Paid first month's shop rent of $1000. Why would cash be a credit, when you are actually removing cash from your account? I really don't understand the whole concept of the journal entries here's the source, plz view the 9/15 entry! http://www.netmba.com/accounting/fin/process/journal/

Public Comments

1. Remember, credits must equal debits, just like A= L+SE. Cash is an asset, and credits in assets are negative. Expenses are a liability, and debits in liability are negative. Remember your balance sheet! I hope this helps!
2. The cash account is an asset. All asset accounts have a normal debit balance therefore if you use a Tchart with debits on the left and credits on the right there would normally be a number on the left. All expense accounts are liabilities and thus normally having a credit balance on the right side of a Tchart. When you are trying to decrease an asset account (cash) you would have to credit the account or make an entry to the right side of the Tchart. To increase an expense account you would have to make an entry into the left hand side of the Tchart or debit that account. Thus what this journal entry is doing. Maybe try thinking about it as debits are positive credits are negative. Assets are debits and liabilities are credits. In order to decrease an asset account you would have to add a negative number (credit) to the equation. I know its confusing at first but once you get it it will come like second nature. I should know I have a masters in Accounting!
3. If your problem is understanding when to place a debit or a credit in an account, you need to learn what accounts have normal debit balances and what accounts have normal credit balances. The first two answers given are good advise. But, if you have a check book, your first exposure to debits and credits was probably from the check book register. And guess what, it' the opposite of your own accounting books. You will notice in your check register that when you make a deposit, it's a credit; and when you write a check, you debit the amount of the check. This is the opposite of what you do in your cash account. The reason for this is that the check register is the banks records, not yours. Your deposit in the bank is a liability to them; and therefore it is a credit. It's a liability to them because they owe the money to you upon demand. However, in your own records, assets carry a normal debit balance, liability's carry a normal credit balance, capital carries a normal credit balance, revenue carries a normal credit balance, and expenses carry a normal debit balance. debit + debit you add credit + credit you add debit + credit change the + to - and subtract A debit added to your debit cash balance will increase the balance. A credit added to you debit cash balance will decrease the balance. Other than this, check your book to see how a debit or a credit posting to to each type of account will affect the balance.
4. Brian, I suspect like a lot of people you think credits are good and debits are bad because you have seen it on your bank statement. If the balance on the bank statement is CR you are happy. If the balance on the bank statement is DR :(. The bank however does not care about you ( a simple concept to digest) It is reporting its own situation. Your money in the bank that you are happy about, is actually a liability to the bank. The NATURE of a positive liability is CR. When you owe the bank money - it is happy - it now has an asset. The NATURE of a positive asset is DR. Do not think of credits & debits as good and bad - learn their nature and you will be able to move forward.