Typical Business Transactions (Debit and Credits)

In a typical business transaction we get something and we give up something.

Sale-Sell goods and/or services

    (1) Cash Sale-customer pays at the time of sale
    The business gets cash or a check from their customer and gives up a product or service to their customer.
    Accounts Used:
    Debit: Cash   
    Credit: Sales

    (2) On Account Sale-business allows the customer time to pay
    The business gets a promise to pay from their customer and gives up a product or service to their customer.
    Accounts Used:
    Debit: Accounts Receivable   
    Credit: Sales

Purchase goods and/or services

    (3) Cash Purchase-business pays the supplier at the time of purchase
    The business gets a product or service from their supplier and gives up cash or a check to their supplier.
    Accounts Used:
    Debit: Expense or Inventory Account   
    Credit: Cash

    (4) On Account Purchase-supplier allows the business time to pay
    The business gets a product or service from a supplier and gives up a promise to pay to their supplier.
    Accounts Used:
    Debit: Expense or Inventory Account   
    Credit: Accounts Payable

(5) Pay Supplier Charge Purchases -pay suppliers for products and/or services that we promised to pay for later (charge).
The business gets the amount of their promise to pay the supplier reduced and gives up cash or a check.
Accounts Used:
Debit: Accounts Payable   
Credit: Cash

(6) Receive Customer Charge Payments -receive payments from a customer that promised to pay us later (charge sale).
The business gets cash or a check from their customer and gives up (reduces the amount of) their customer's promise to pay.
Accounts Used:
Debit: Cash   
Credit: Accounts Receivable

(7) Borrow Money (Loans) The business gets cash or equipment and gives up a promise to pay.
Accounts Used:
Debit: Cash or Equipment   
Credit: Note Payable

(8) Repay a Loan
The business gets the amount of their promise to pay reduced and gives up cash or a check.
Accounts Used:
Debit: Note Payable   
Credit: Cash

(9) Draw
The business gets the owner's claim to the business assets reduced and gives up cash or a check.
Accounts Used:
Debit: Owner's Draw   
Credit: Cash

(10) Payroll (not covered in this tutorial)
The business gets services from their employees and gives up a check.
Accounts Used:
Debit: Salary & Wages Expense   
Credit: Cash