A cash dividend is declared Equityand paid to shareholders.A bill for electricity used inthe current month is receivedbut not payable until thefollowing month.Products are sold tocustomers on 30-days' creditA customer makes a depositon a special order that willnot be manufactured untilnext year.DebitedCash dividends declared butnot yet paid.A shareholder invests moneyin a business by making aloan with commercial termsto the business.Current Assets+(<><>►(CreditedCurrent AssetsTime left 2«><>(dh

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Description: A cash dividend is declared Equityand paid to shareholders.A bill for electricity used inthe current month is receivedbut not payable until thefollowing month.Products are sold tocustomers on 30-days' creditA customer makes a depositon a special ord

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FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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A cash dividend is declared Equity
and paid to shareholders.
A bill for electricity used in
the current month is received
but not payable until the
following month.
Products are sold to
customers on 30-days' credit
A customer makes a deposit
on a special order that will
not be manufactured until
next year.
Debited
Cash dividends declared but
not yet paid.
A shareholder invests money
in a business by making a
loan with commercial terms
to the business.
Current Assets
+
(
<>
<>►
(
Credited
Current Assets
Time left 2
«>
<>
(
dh

Expert Solution

Step 1: Introduction of Accounting and rules for debit and credit

A whole accounting process revolves around recording of business transactions, summarizing general ledger balances and then preparation of financial statements on that basis. Recording of business transactions into journal is very first step in accounting cycle process.

For recording, rules of debit and credit need to be followed. These rules are:

Debit the receiver and Credit the giver
Debit what comes in and credit what goes out
Debit all the expenses and losses and credit all the income and gains.

For each and every transaction, at least one account needs to be debited and at least one account needs to be credited.

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