04-18-2013, 09:17 PM
I am looking at a transaction on general ledger and I have a question in understanding why I do one thing vs. another.
Transaction: Billed a customer 2,000 for service performed (how do I enter it)
Below is the right way to enter it because it is the answer (however, I am confused by this entry below are my reasons why, can you please help me with what am I missing in my logic)
Accounts Receivable 2,000 Dr
Cash 2,000 Cr
Account receivable is an Asset account (Assets go up by Dr, & down by Cr). when you bill someone your asset goes up so you Dr it (this makes sense to me)
Cash - why do you Cr is (Cash is a Asset account and it goes up by Dr, and down by Cr). So when you enter cash as Cr I understand this as a decrease in an asset?
One explanation of the entry above is based on doing normal balance transactions, is this where I am wrong in how I understand entries? If I were to follow normal balance logic, then the entry above would make sense (i.e. Accounts Receivable = Revenue Account therefor normal bal = Cr and Cash = Asset Account therefor normal balance = Dr).
Sorry long paragraph but trying to understand what am I missing in my logic in entry. Am I basing entries based on normal balance or looking at what makes an account go up vs. go down.
thank you all for your help!!
Transaction: Billed a customer 2,000 for service performed (how do I enter it)
Below is the right way to enter it because it is the answer (however, I am confused by this entry below are my reasons why, can you please help me with what am I missing in my logic)
Accounts Receivable 2,000 Dr
Cash 2,000 Cr
Account receivable is an Asset account (Assets go up by Dr, & down by Cr). when you bill someone your asset goes up so you Dr it (this makes sense to me)
Cash - why do you Cr is (Cash is a Asset account and it goes up by Dr, and down by Cr). So when you enter cash as Cr I understand this as a decrease in an asset?
One explanation of the entry above is based on doing normal balance transactions, is this where I am wrong in how I understand entries? If I were to follow normal balance logic, then the entry above would make sense (i.e. Accounts Receivable = Revenue Account therefor normal bal = Cr and Cash = Asset Account therefor normal balance = Dr).
Sorry long paragraph but trying to understand what am I missing in my logic in entry. Am I basing entries based on normal balance or looking at what makes an account go up vs. go down.
thank you all for your help!!
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