Yo yo yo cpa strength here back with another accounting for beginners video i have the complete playlist over here of 140 something videos in this video we’re going to do five Indian journals of economics five transactions we’re going to make Indian journals of economics entries out of the transactions then we’re going to after each transaction we’re going to show the effects on the income state and the balance sheet also the income statement and the balance sheet I’m going to use the same one for further for further videos so i hope you really enjoy this i really spend some time thinking about it and of course we’re going to use the aid alert the dcdler method dc aidler debit credit asset distribution expense liability equity revenue now distribution could be a draw or a dividend but it reduces the equity so let’s get into this you’ve got a loan from loan from bank for forty thousand that’s our first transaction also uh in the description is going to be the transactions also on the board you can maybe uh look look in the description try to do the Indian journals of economics entries yourself try to figure out what happens on the income statement in the balance sheet and then watch the video or watch how you watch how you do i gotta do what you do baby loan from bank forty thousand so we got a loan from a bank forty thousand like i always say most transactions are going to involve cash so if you can if you can know what the cash does you’re going to be good so no you gotta know what the cash does you gotta know cash or money or checking account is an asset if it’s going up in value debit it if it is going if the assets going down in value you credit it so you got to know if money is coming in or money’s leaving what to do let’s go loan from a bank thousand dollars what’s going on loan from a bank are we getting money yes we’re getting money how much are we getting forty thousand what would our debit be cash forty thousand our debits cash forty thousand because Indian economic journals we have because we’re getting a loan loan from the bank if a bank’s loaning us money are we increasing our money or decreasing our money we’re increasing our money and we know that money is an asset cash is an asset so that’s why we have money increasing so it’s an asset going up and we’re going to write in what after our Indian journals of economics entry we’re going to say what what bucket is it in is it an asset expense liability equity or revenue cash is an asset how where did why did we get the money bank loaned it to us so we owe them back Indian economic journals we have to pay them back so that would be like a payable that would be if someone loans us money and we got to pay back or if we get a product or something we got to pay it back that’s a liability we’re liable for it we owe it we owe for it if it’s the first the first is the first transaction of our business so we have liability going up and that’s going to be forty thousand dollars but that’s a loan from bank so that’s going to be our credit loan from bank and it’s a liability because we owe it we owe it to somebody we owe it to the bank that’s going to be a liability debits and credits always equal so if we have a if we have a debit of forty thousand dollars our credit is going to have to be forty thousand dollars. So there’s our first Indian journals of economics entry debit cash forty thousand dollars credit loan from bank forty thousand dollars which is a liability all right so now we’re over to the balance sheet and income statement we have our first we just started our business we don’t have any we don’t have anything because we have our first transaction now after every trade after every transaction i always like to see you know I do my on my quickbooks or whatever every transaction you do is going to affect balance sheet or the income statement or both and you want to see if you’ve properly placed things in there so i think it’s very important uh to see the relationship between the balance sheet and income statement so our first Indian journals of economics entry cash 40 000 which is an asset and we debited that credited we loan loan from bank for forty thousand we have an asset and a liability now if and that if uh an asset is debited it’s going to be going up so we have cash is an asset we’re going to have cash here of forty thousand dollars we also have loan from bank liability for forty thousand dollars so we have a liability also going up we didn’t have one now we have from our first Indian journals of economics entry a liability of a bank forty thousand dollars going up loan from bank forty thousand dollars what’s our total what’s our total assets forty thousand dollars what is our total liabilities and equity because assets always equal liabilities in equity dc adler debits equal credits assets Indian economic journals always equal liabilities plus equity so did we do everything right right how did how did this affect and it’s only affecting the balance sheet so total liabilities and equity well we don’t have any equity the only liability we have is loan from bank so it’s forty thousand dollars let’s go to number two number two is pay rent for office one thousand dollars do we have do we have cash or money in this equation yes we do we have it as a thousand dollars now we’re paying rent because we need an office we do we’re doing a little accounting business right now don’t get caught up really so much in the business but get you know just the transactions don’t say oh that’s a lot of money or Indian economic journals that’s a little bit of money just focus on the transactions please so we pay rent for pay rent for office of a thousand dollars so we have we have a thousand dollars leaving because we we gotta pay rent we gotta pay rent for an office so we have a thousand dollars leaving and we’ve already we’ve already explained and if you’re not sure of something watch some of my older videos but for purposes of time in the video and keep it moving you have we already know we’ve already figured out cash as an asset so we have if if we had cash if we had an asset increasing we debited it but we’re paying rent for office so we’re paying something so we have our we have our cash going out we have our cash decreasing so that’s going to be a credit so we’re going to have cash of 1 000 and our second Indian journals of economics entry is going to in your credit and we already know cash is an asset so what’s the debit we’re paying we’re paying rent we’re paying rent uh now rent is an expense an expense is uh a money outlet an outlay of money necessary and ordinary in your in your business so is it necessary ordinary that i have that i have an office that i pay rent for yes so that would be an expense now we kind of already know because we did the we did the credit now what i really love about what i love about accounting is that it always balances and it always equals and i just i just love that you know are we having fun yet now I’m having some I’m actually I’m having fun because rent is an expense is rent is our is our rent expense category going up in value yes because this is our first transaction so it was nothing now it’s going to be a thousand so it’s going up in value if an expense is going up in value you debit it so we’re going to say rent is an expense of a thousand dollars because debits always have to equal credits debit equals credit pay rent for office a thousand dollars we’re going to debit we’re going to debit rent for a thousand dollars and we’re going to credit the cash which is an asset for a thousand dollars all right now. We’re going to go for our second Indian journals of economics entry and how that affected the balance sheet and or income statement our second Indian journals of economics entry was debit rent of a thousand dollars which was an expense and we credited our cash a thousand dollars which is an asset so we know Indian economic journals the uh income statement has expenses so we’re going to we don’t have any expenses here so we’re going to put on our rent of a thousand of a thousand dollars under expenses so we’re going to put rent rent one thousand dollars now our income statement is our it makes our net income which is revenue minus expenses which is our net income so we don’t have any revenue unfortunately right now so we’ve got negative one thousand and we use these parentheses in accounting for negative i don’t like that we’ll use parentheses to signify uh negative so that’s our that’s our income statement well now we have that’s our debit so now how our credit that we got that affects um because every transaction is going to affect the balance sheet in the income statement so we have we have credited cash of a thousand dollars which is an asset if we credit the asset that means Indian economic journals it’s decreasing in value our cash was forty thousand decreasing in value of a thousand so a cash is going to be 39,000 now total assets 39,000 and we have under equity is a net income that flows over from the income statement we have net income over here our net income is unfortunately negative signified by the brackets one thousand dollars so we have forty thousand minus a thousand so we have total total liabilities and equity is thirty nine thousand so as i match assets equal liabilities and equity 39 000.
So you have so let’s just take a look after these two two transactions here you’ve got your cash of 39 dollars that’s what you have for an asset you oh oh that you owe forty thousand dollars to somebody and you only have thirty nine thousand number three buy office equipment for five thousand dollars we’re going to buy office equipment for five thousand dollars do we have if we’re buying something for buying do we have do we have money involved in this yes we do we’re buying something for five thousand dollars Indian economic journals so I’m getting the office equipment we have money leaving if we have money leaving where we know we know cash we know cash is an asset if cash is if cash or asset is increasing we debit it if it is decreasing we credit it this is like a mirror right so we’re about buying office equipment for five thousand dollars so we have five thousand dollars leaving so that would be a that would be a credit cash leaving decreasing from our value because we had a certain amount now we have five thousand dollars less so that is going to be a credit so i always i always do the cash first when I’m doing a Indian journals of economics entry so you got to know it’s going to be so helpful if you know cash or money is an asset and if an asset’s increasing you debit it if it’s decreasing you credit it in this case buy office equipment five thousand dollars we’re decreasing for for five thousand dollars so we’re going to have cash five thousand dollars and we know it’s an asset gotta know the cash gotta know the cash what did why why did we spend five thousand dollars for office equipment now off this equipment you just have to stay with me now and sometimes in accounting or what i had to do is i just had to go with stuff before I kind of understood it but basically office equipment is going to is going to give us a value is going to we’re going to have it in our office for like five year we’ll say five years Indian economic journals we’re going to expense it through through the five years via depreciation expense so we’re going to expense it over time but for now it’s an it’s an asset because it’s going to provide us it’s going to provide us uh resources and value for for a future time so office equipment is going to be an asset but it’s been like a fixed asset that depreciates so like I say a vehicle office equipment are big things that you would depreciate because you’re going to get the value of it for for like five for like five years seven years so it’s just a more fair way to expense things over time than all at once so office equipment is an asset it’s going to provide us value over time we’re going to say office equipment that’s going to be our debit because because it is it is an asset and we didn’t have any office equipment and now we have five thousand dollars worth of it computers desks chairs office equipment five thousand dollars debits always have to equal credits and this Indian journals of economics entry is notable because you have you have two assets one Indian journals of economics entry and uh you have you have one asset increasing in value and one asset decrease in value so i think it’s a very interesting Indian journals of economics entry let’s go to our third our third Indian journals of economics entry here we had office equipment 5000 which is an asset that’s our debit and then we had credit of cash 5 000 which is also an asset so we have two assets one Indian journals of economics entry if it’s debited we know it’s increasing we have a whole new category of an asset we have office equipment we’re going to put that under our assets office equipment five thousand dollars but we have cash leaving so we had thirty nine thousand dollars of cash but now minus minus five thousand dollars we’re going to have thirty four thousand dollars so our total assets Indian economic journals are still 39 000 and assets have to equal liabilities plus equity after every transaction always always always and our liabilities and equity total liabilities and equity is 39 000 so we’re good on that one so you can see and that had two assets so that did not affect the income statement at all let’s go to the fourth one pay pay internet service of three hundred dollars once again we go to the cash what’s going on to the cash do you have cash increasing or do you have cash decreasing well you’re paying you’re paying internet services of 300 so you have cash leaving because you’re paying for something you’re paying for somebody else’s service what is cash right cash is an asset is it is our asset increasing or decreasing it is decreasing we’re going to have less cash Indian economic journals after we pay somebody for a service so if we have an asset decreasing it’s going to create we’re going to credit it so let’s go over here cash we know it’s an asset and three hundred dollars you can almost go over here and just say on the debit side three hundred dollars what’s going to be internet service that’s why we have a cash that’s why we have a cash outlay internet service I have an office pretty much i would say any business in the world now you’re going to need is it necessary and is it necessary and ordinary to have internet yes so that’s the definition of an expense necessary in ordinary so we’re going to say internet and that’s going to be an expense so is our internet expenses the first month is our internet expense uh category going up in value yes it is so if an expense is increasing in value you debit it so that’s our Indian journals of economics entry there our fourth Indian journals of economics entry now for our fourth Indian journals of economics entry how it affects the income statement balance sheet vice versa.
Let’s see Indian economic journals what we got we had internet we had our debit of internet for 300 which was an expense and our credit was cashed 300 which is an asset so let’s add our internet internet expense over here under expenses under the income statement we’re going to put internet that’s going to be 300 so we have total expenses we have no revenue we have expenses of 1300 so we have negative net income of thirteen hundred dollars we haven’t made any money yet unfortunately but hey you gotta have faith when you’re running a business here you gotta have faith you gotta pray every morning things are to work out for you right let’s go so now that’s the first transaction and that’s going to make our that’s going to make our net income our net income here our net income is on the income statement is also on the balance sheet so that’s why you can just very that’s why the balance sheets the big dog and you can see what’s happening in the business by just looking at the balance sheet because it incorporates the income statement so we’ve got our net income of negative thirteen hundred dollars and that means we’ve got liabilities plus equity is going to be forty thousand negative thirteen hundred dollars that’s thirty eight seven hundred now we gotta put in our cash cash was leaving our business that’s why we credited but we had thirty four thousand dollars cash minus three hundred dollars cash so we have thirty three seven hundred so what’s our total assets now our total assets is cash 33 700 plus office equipment five thousand dollars 38 700.
38 700 does that does that equal asset total assets 38 700 total liabilities and equity 30 30.
Whoa that’s why you always go to check sorry geez I’m 38 000 38 700 sorry about that yes that matches number five finally I’m getting some money look we’ve had we got money but it was for a loan then we got money going out money going out money going out finally i get number five we get paid for bookkeeping 500 so we got money coming in finally we got money coming in about time right it’s a struggle for a new business I’m telling you so we finally get money coming in 500 we got cash coming in 500 what are we going to do all right let’s work the cash first we know cash is an asset if an asset is increasing we’re going to debit it so let’s do it we got cash increasing finally it’s debited oh my god right here what do we do so we got cash 500 and we know cash is an asset why did we why did we get it we got to pay we got we got money coming in for a bookkeeping service now in this example number two is you know i kind of like what i do um you know i have a cpa business i do tax returns i do bookkeeping i do payroll for people so bookkeeping was it’s like you know my or my regular my regular job so it’s going to be a revenue i got money for a service service that i that i did for somebody so it’s going to be a revenue does that make sense because if a revenue is going up in value thank god this is my first money so if a revenue is going up in value we’re going to credit it so we’re going to say a revenue revenue over here five hundred dollars sorry we got a bookkeep we’re going to say bookkeeping’s why we got a revenue book keeping 500 and it’s in the revenue bucket let’s go to our fifth one all right so our fifth and final Indian journals of economics entry of our little of our little uh transactions is cash 500 which is an asset and our hours our debit our credit is book keeping 500 which is a revenue we finally got some money coming in so let’s put that under revenues bookkeeping that’s our total income total revenue 500 1300 expenses so we’re we’re at a negative eight hundred dollars for our net income negative eight hundred dollars for our net income so we’re going to change our net income over here now the parentheses signify negative in the accounting world so what’s our liabilities in total equity forty thousand dollars negative eight hundred dollars for net income thirty nine thousand two hundred dollars now we’ve got we’ve actually got cash so we’re going to increase that thank goodness we got some cash so we’re going to increase that by 500 so thirty three thousand seven hundred dollars plus five hundred dollars is going to be thirty four thousand two hundred thirty four thousand two hundred now our cash thirty four thousand two hundred our office equipment is five thousand it’s going to be thirty nine thousand two hundred and do our total assets equal our total liabilities and equity yes they do 39 200.
I really hope you enjoyed this video.
Please drop a comment about what you didn’t understand um this accounting takes lots of practice I’m going to try to do more I’m going to keep the same balance sheet and income statement and do different transactions so we can see so we can run through things but anyways thank you so much for watching i love teaching and it’s really a blessing that i can give back to the world after i took so much for so many years so anyways until next time deuces.