Journalizing transactions is a simple matter of deciding what took place in an exchange. You record what you received and you record what you gave up. It makes no sense to try to memorize journal entries. The idea is to analyze what was exchanged. You received or gave up assets and you use the debit and credit rules to record that. You incurred a liability (gave a promise to pay later) or you got your promise back because you discharged the liability. Again a credit or debit. Similarly with capital. You issued stock for cash so you received cash (a debit) and record a credit in owners’ equity representing the owner’s interest in the business assets. Or bought back stock giving up cash (a credit) and reducing the owner’s interest in the business (a debit in a capital account). You increase capital (credit revenue) by providing a service or product. You decreases capital (debit an expense) by using up assets or services. As long as you understand what was exchanged, you can decide what to debit and credit.

What did you get in this transaction? two assets!

What did you give in this exchange? Some cash and a mortgage note.

Of course you have to know that debits are used to increase assets and decrease equities. And credits . . . .A-ah! You must know this.

June 16-

Byte purchased a building and the land it is on for $137,000 to house its repair facilities and to store computer equipment. The lot on which the building is located is valued at $22,000. The balance of the cost is to be allocated to the building. Byte made a cash down payment of $13,700 and executed a mortgage for the balance. The mortgage is payable in eight equal annual installments beginning July 1.

Please help me make a journal entry!