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Business Mathematics Chapter 1, Section 10-12: Debits and Credits

Business Mathematics Chapter 1: Stewardship
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Terms to Know:
Section 10: Debits and Credits
  • Assets, liabilities, capital, income, cost of goods sold, and expenses are the six accounting categories used in bookkeeping.
  • A journal is a book of ruled with columns in which to enter the dollar amounts of any business transaction.
  • A double-entry bookkeeping system means that for every financial transaction in a business there are two entries - a debit entry and a credit entry.
  • A debit entry is a dollar amount that is recorded in the left column.
  • A credit entry is a dollar amount that is recorded in the right column.
How To Fill Out Credit Entries/Debit Entries
  • An increase in assets is entered in the left (debit) column.
  • A decrease in assets is entered in the right (credit) column.
  • An increase in the cost of goods sold is entered in the left (debit) column.
  • An increase in expenses is entered in the left (debit) column.
  • An increase in liabilities is entered in the right (credit) column.
  • A decrease in the capital is entered in the left (debit) column.
Section 11: The General Journal
  • A general journal can be used to record all of a business's financial transactions.
  • For every debit entry, there must be a credit entry.
  • Total debits must equal total debts.
Section 12: The Ledger
  • The general ledger is used help organize all of the general journal entries into categories according to their account name.
  • Posting is the transferring of the general journal entry to the general ledger.
Accounting Categories
  • Assets (100)
  • Liabilities (200)
  • Capital (300)
  • Income (400)
  • Expenses (500)
  • Cost of Goods Sold (600)
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