Owners' Equity | QB Scott

For the image below, total Debits less total Credits equal the Account Balance. So, in the example in the image, total Debits of 2,675 less total Credits of 275 equal 2,400. This is a Debit amount since, in this example, Debits are greater than Credits.

All Debits and Credits are tracked in an Account’s T-Account. When tracked properly, it’s easy to figure out the balance of an account.

Each Account has it’s own T-Account. This allows proper transaction tracking of Debits and Credits.

A T-Account visually represents the impact transactions have on a particular account. As seen in the image, the white “T” allows space for an Account Name (at the top), Debit Side (Left), and Credit Side (Right). It’s a simple visual that helps when trying to understand the balance of an account.

The normal balance of an Expense Account is a Debit. So, if you purchased $450 worth of office supplies, it means you have a $450 Debit in the Office Supplies account.

The normal balance of a Revenue Account is a Credit. So, if you earned $750 from selling widgets (Sales), it means you have a $750 Credit in the Sales account.

Like Liability Accounts, the normal balance of an Owners’ Equity Account is a Credit. So, if you have $250 in Retained Earnings, it means you have a $250 Credit in the Retained Earnings account.

The normal balance of a Liability Account is a Credit. So, if you owed $750 to someone in the form of a Notes Payable, it means you have a $750 Credit in the Notes Payable account.

The normal balance of an Asset Account is a Debit. So, if you had $1,000 in a bank account, it means you have a $1,000 Debit in the bank account.

Debits must always equal Credits. On every transaction the total of the Debits must equal the total of the Credits. In some transactions you may have more than one Debit and only one Credit. Or you may have one Debit and more than one Credit. Regardless the total value of Debits must equal the total…

Posts Tagged ‘Owners’ Equity’

T-Account Example

What T-Accounts do

How T-Accounts help

Anatomy of a T-Account

Normal Balance: Expense

Normal Balance: Revenue

Normal Balance: Owners’ Equity

Normal Balance: Liabilities

Normal Balance: Asset

Debits = Credits