136 Accounting: Business Reporting for Decision Making
5/9 The business received $10 000 from coaching services.
Date Name of account Dr Cr
5/9 Cash
Services fees$10 000
$10 0007/9 The business paid rent of $1000 for September.
Date Name of account Dr Cr7/9 Rent expense
Cash$1 000
$1 000When recording the transaction in the ledger, the description identifies the corresponding ledger entry.
Instead of using journals, we could record the transactions in the ledger account:
Cash 100
1/9 Capital — N Cash $ 20 000 3/9 Office equipment $ 500
5/9 Coaching fees 10 000 7/9 Rent 1 000
30/9 Balance c/d 28 500$ 30 000 $ 30 0001/10 Balance b/d $ 28 500Accounts receivable 1104/9 Coaching fees $3 000Office equipment 1303/9 Cash $500Capital — N Cash 3001/9 Cash $ 20 000Coaching fees 4004/9
5/9Accounts receivable
Cash$
$
$3 000
10 000
13 000Rent expense 5307/9 Cash $1 000Examine the cash ledger account. It has been balanced at the end of the period by subtracting the side
with the smallest balance from the side with the highest balance. The resulting amount is a cash bal-
ance of $28 500 on 30 September. This amount is c/d (carried down) to the start of the next period. On
1 October, the balance has been b/d (brought down), and this provides the opening balance for the new
period.
Note that similar rules apply to the debits and credits as they do to the accounting equation: there will
be dual effects for every transaction. For debits and credits, each transaction will have at least one debit
and at least one credit. For example, for the transaction on 3 September, it would be incorrect to record
the transaction by debiting office equipment and debiting cash. First, we have not recorded a debit and
a credit. Second, according to the debit and credit rules, a debit to cash will increase the asset cash
account, and that is not what we want to do — we want to decrease the cash account! This is achieved
by crediting the account.