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Accounting Effects

Accounting Transactions :

Debit Credit Effects

Sr. No Type of Transactions Assets Liabilities + equity
1 Buy fixed assets on credit Fixed assets increase Accounts payable (liability) increases
2 Buy inventory on credit Inventory increases Accounts payable (liability) increases
3 Pay dividends Cash decreases Retained earnings (equity) decreases
4 Pay rent Cash decreases Income (equity) decreases
5 Pay supplier invoices Cash decreases Accounts payable (liability) decreases
6 Sell goods on credit (effect 1) Inventory decreases Income (equity) decreases
7 Sell goods on credit (effect 2) Accounts receivable increases Income (equity) increases
8 Sell services on credit Accounts receivable increases Income (equity) increases
9 Sell stock Cash increases Equity increases

Debit Credit Effects :

Debit Credit Effects

Transactions Effect on Capital Effect on Assets Effect on Expenses Effect on Income Effect on Liabilities
  Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr.
A and B start a computer business.
A invests cash of 60000 and
B invests 30000
  90000 90000
They pay rent by cash
for office as 1000
They purchase furniture
of 500 by cash
    500 500
They procure 10 computers
worth Rs.800 each on credit
from Mr. C
    8000             8000
But they sell extra 3 computers out of 10 for Rs.900 each on cash     2700
They pay electricity bill Rs.200 by borrowing from Mr. D         200         200
Total 0 90000 101200 3900 1200 0 0 300 0 8200

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