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credits and debits

My uncle has ran a motorcycle shop. He has decided to computerize his records and has asked me to explain the basics of accounting to him so that he can enter his data into his accounting software.
1. Explain to him the rules of debits and credits for the balance sheet and income statement.
2. Provide examples from the manufacturing industry of:
a. a journal entry that would be recorded that impacts the balance sheet
b. a journal entry that would be recorded affecting the income statement.
3. Please provide the assumptions behind the transactions and the full journal entries.

Solution Preview

My uncle has ran a motorcycle shop. He has decided to computerize his records and has asked me to explain the basics of accounting to him so that he can enter his data into his accounting software.
1. Explain to him the rules of debits and credits for the balance sheet and income statement.
Debit and credit are the rules to record the transactions. Every transaction can be described in its debit/credit form. Following are the rules and regulations
ACCOUNT INCREASED BY DECREASED BY NORMAL BALANCE:
Assets Debits Credits Debit
Liabilities Credits Debits Credit
Equity Credits Debits Credit
Revenue Credits Debits Credit
Expense Debits Credits Debit
Dividends Debits Credits Debit

2. Provide examples from the manufacturing industry of:
a. a journal entry that would be recorded that ...

Solution Summary

This solution provides the assumptions behind the transactions and the full journal entries.

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