Question

Name the accounts debited and credited for each of the following transactions.

1. Billing a customer for work done.
2. Receipt of cash from customer on account.
3. Purchase of office supplies on account.
4. Purchase of 15 gallons of gasoline for the delivery of truck.

Short answer

The accounts debited and credited for each transaction are as follows:

1. In the case of billing a customer for work done, accounts receivable will be debited, and revenue earned from services rendered will be credited.
2. In case of receipt of cash from a customer on account, cash will be debited, and accounts receivable will be credited.
3. In case of purchase of office supplies on account, office supplies will be debited, and accounts payable will be credited.
4. In case of purchase of 15 gallons of gasoline for the delivery of truck, expenses paid on delivery are to be debited as well as cash is to be credited.

Step-by-step solution

Meaning of transaction

A transaction is defined as a written agreement between a buyer and a seller to interchange goods, services, or assets for money.

Explanation for statement ‘a’

According to accounting rules, all expenses are debited and incomes credited. Therefore, accounts receivable will be debited here as it is treated as an expense. While revenue earned on the performance of work is an income, it will be credited.

Explanation for statement ‘b’

When the cash enters the business from the customers, then the cash is to be debited, and account receivables are to be credited. Here, the cash is brought by the customer, due to which it is to be debited, and since the customer account is closed, accounts receivable are to be credited.

Explanation for statement ‘c’

The company can record the office supplies bought on credit by debiting the office supplies account as well as crediting accounts payable. Here, office supplies is an asset account; its normal balance is on the debit side of the balance sheet.

Explanation for statement ‘d’

As per the accounting rule, debit all expenses and losses and credit all incomes and gains. Therefore, the expenses incurred on the purchase of gasoline are to be debited, and cash is credited.