I have to figure out what basic type of account debited and credited, the specific account, whether the account is increased or decreased, and the normal balance of the specific account.
This is the transaction.
Purchased used car for $4,000 cash for use in business.
For the debited side I got basic type-asset, specific account-equipment, effect-increase, and normal balance-debit. For the credited side I got basic type-asset, specific account-cash, Effect-decrease, and Normal balance-credit. Am I on the right track with this?
Thank you! This will come in handy!
Yes, you are on the right track. Let's break it down:
1. Debit side:
- Basic type: Asset (because the equipment is being acquired for use in the business)
- Specific account: Equipment
- Effect: Increase (since you are purchasing a used car for $4,000 cash)
- Normal balance: Debit
2. Credit side:
- Basic type: Asset (because cash is involved)
- Specific account: Cash
- Effect: Decrease (since you are paying out $4,000 in cash)
- Normal balance: Credit
So, in summary, the transaction "Purchased used car for $4,000 cash for use in business" would be recorded by debiting the Equipment account for $4,000 (since you are increasing the equipment asset) and crediting the Cash account for $4,000 (since you are decreasing the cash asset).