#DEBIT CREDIT ANALYSIS SOFTWARE#

The loan account, a liability account, is debited $500, reducing its balance. Of this amount, $500 is applied to the principal, and $40 is applied to the loan interest.Īnalysis: Since a check is being written, QuickBooks automatically credits Cash. You pay $540, via check, on the $8,000 loan acquired in Example 2. Liability accounts are credit accounts, so crediting the Liability account increases its negative balance (move left on the number line).Ĭredit Loans Payable (increases its balance) The account to receive the credit is a Liability account called Loans Payable (you may create a separate account or sub-account for each loan). Analysis: Since the money is deposited into the checking account, Cash is debited. Since Equity accounts are negative accounts, crediting this Equity account increases its negative balance by $5,000.Ĭredit Owner’s Equity (increases its balance) Example 2: Company Takes Out a Loan An Equity account called Owner's Equity or Capital Contribution receives the credit. Analysis: Since money is deposited into the checking account, Cash is debited (the balance increased by $5,000). So let' look at some super sample transactions! Example 1: Owner Invests Capital in the Company But one must know which accounts to debit and credit when posting journal entries.

#DEBIT CREDIT ANALYSIS SOFTWARE#

In some cases, such as when writing a check in QuickBooks, the software program knows to credit (subtract from) Cash, so you only need to know which account, often an expense account, should receive the debit. But the total amount of the debit must equal the total amount of the credit. In some cases, two accounts may receive the debit or credit. When recording a transaction or journal entry in accounting software such as QuickBooks or Sage Accounting (Peachtree), one account is debited and another account is credited.

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Debit credit analysis