Procedure for posting a credit transaction to a journal account
what is credit transection
Credit transactions can be divided into two types, Creditors credit transactions, and Debtors credit transactions.
Creditors?
- The company receives goods & services without giving cash
- the company receives cash without giving goods & services
- the company receives cash by Giving securities (borrowing)
Debtors?
- The company gives goods & services without receiving cash
- the company gives cash without receiving goods & services
- The company Gives cash by receiving securities (lending)
Example
- 05/12/20 goods purchased from RK traders $600 (Payment Nil)
Transaction entry
05/12/20 goods purchased from RK traders $600 on credit
Procedure for posting a credit transaction to a journal account
There are two things you need to know to understand credit transaction
- Just record who gives to the company and who receives from the company
- The company should not be taken as a giver or receiver
Procedure for posting a credit transaction to a journal account
Only the position of the outsider should be found in the personal account
# The name of the person is required for the credit and credit repayment transaction
debit Person Name :The person receiving the goods and services or cash/ Name of the borrower D
credit Person Name: The person given the goods and services or cash/ Name of the lender C
The cash account must be recorded if there is movement of cash
Only the position of the company should be found in the real account
- Debit :cash comes in
- Credit : cash goes out
There is no need to recorded a cash account if there is no movement of cash
# you need to know the type of the transaction and where to post for it (debit or credit) (Nominal account)
The types of the transaction to be posted in the debit
- Purchased by: Goods & Services / asset.
- Expenses
- Loss: Any loss to the company
The types of the transaction to be posted in the credit
- Sales: Goods & Services /asset
- Income: Indirect sources of income
- Gain: Direct sources of income
▶ 05/13/29 Inventory purchased from almas on credit $2600
This is a credit transaction so follow the credit transaction separation steps
▶ first step : Identify the personal account posting
credit : almas Givies the goods so credit almas A/C
▶ There is no need to recorded a cash account if there is no movement of cash
▶ This is the type of the purchase and the debit posting so debit purchased Inventory A/C
| date | particular | amount | amount |
|---|---|---|---|
| 05/13/29 | purchased Inventory A/C D | 2600 | |
| to almas A/C | 2600 | ||
| purchased Inventory on credit to almas |
▶ 07/02/24 Unpaid freight truck charge to david freight truck services P,LTD $6000
▶ first step : Identify the personal account posting
credit : freight truck services P,LTD Givies the freight truck services so credit david freight truck services A/C
▶ There is no need to recorded a cash account if there is no movement of cash
▶ This is the type of the expenses and the debit posting so debit freight truck charge A/C
| date | particular | amount | amount |
|---|---|---|---|
| 07/02/24 | freight truck charge A/C D | 6000 | |
| to david freight truck services A/C | 6000 | ||
| Unpaid freight truck charge to david freight truck services |
▶ 12/19/23 The rent paid in advance to valuable rent services company is $210
▶ first step : Identify the personal account posting
debit :valuable rent services company recive the cash so debit valuable rent services company A/C
The cash account must be recorded if there is movement of cash
- The Cash goes out So credit bank A/C
| date | particular | amount | amount |
|---|---|---|---|
| 12/19/23 | valuable rent services company A/C D | 210 | |
| to bank A/C | 210 | ||
| The rent paid in advance to valuable rent services company |
▶ 11/07/26 Unpaid advertising fee to NV advertising Company $150
▶ first step : Identify the personal account posting
credit : NV advertising Company Givies the advertising services so credit NV advertising Company A/C
▶ There is no need to recorded a cash account if there is no movement of cash
▶ This is the type of the expenses and the debit posting so debit advertising fee A/C
| date | particular | amount | amount |
|---|---|---|---|
| 11/07/26 | advertising fee A/C D | 150 | |
| to NV advertising Company A/C | 150 | ||
| Unpaid advertising fee to NV advertising Company |
▶ 01/01/23 Borrowed $20,000 from the bank for corporate development
▶ first step : Identify the personal account posting
credit : bank Lending the money so credit bank loan A/C
The cash account must be recorded if there is movement of cash
- The Cash comes in So debit bank A/C
| date | particular | amount | amount |
|---|---|---|---|
| 01/01/23 | bank A/C D | 20000 | |
| to bank loan A/C | 20000 | ||
| Borrowed money from the bank |
▶ 06/01/22 Nana, cecilia and denise invested $80,000 to start a business(2: 2 :3)
An investment is shareholders lending the money to the company (The company is an artificial person) and the company pays interest on that money. This is similar to the transaction we usually borrow
▶ first step : Identify the personal account posting
credit : Nana, cecilia ,denise Lending the money so credit Nana, cecilia and denise capital A/C
The cash account must be recorded if there is movement of cash
- The Cash comes in So debit bank A/C
| date | particular | amount | amount |
|---|---|---|---|
| 06/01/22 | bank A/C D | 80,000 | |
| to Nana, cecilia and denise capital A/C | 80,000 | ||
| invested to start a business |
▶ 08/27/23 denise withdraw $2000 cash from business for personal use
▶ first step : Identify the personal account posting
debit : denise Recive the cash so debit denise Withdraw A/C
The cash account must be recorded if there is movement of cash
- The Cash goes out So credit bank A/C
| date | particular | amount | amount |
|---|---|---|---|
| 08/27/23 | denise Withdraw A/C D | 2000 | |
| to bank A/C | 2000 | ||
| denise withdraw cash from business |
▶ 06/01/22 The goods was sold to cabdi for $2300 on credit
▶ first step : Identify the personal account posting
debit : cabdi recive the goods so debit cabdi A/C
▶ There is no need to recorded a cash account if there is no movement of cash
▶ This is the type of the sales and the credit posting so credit sales A/C
| date | particular | amount | amount |
|---|---|---|---|
| 06/01/22 | cabdi A/C D | 2300 | |
| to sales A/C A/C | 2300 | ||
| The goods was sold to cabdi on credit |
try you are self and asked any qusting ?
- ► 11/07/26 Walker traders did not pay the brokerage fee for selling the goods $720
- ► purchsed furniture from chair manufeture company $836 (160 chairs) on credit
- ► Mohan start business with cash $ 50,000
- ► Purchased goods on credit $ 20,000
- ► Bought furniture on credit $2.000
- ►
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