Struggling with journal entries in accounting?

The extended accounting equation is.
Assets + Expenses + Drawings = Liabilities + Capital + Revenue

Debit means on the left hand side of the equation, credit means on the right side of the equation


DR: Rent (incraese in expense
CR: Cash (decrease an asset)

DR: accounts receivable (increase an asset)
CR: Fees (increase in revenue)

First, you have to understand the debit and credit rules. Assets are increased by debits and decreased by credits, Liabilities and Capital are increased by credits and decreased by debits. That makes the accounting equation logical. Assets = Liabilities + Capital, or Assets - Liabilities = Capital. Given that equation, every transaction involves an equal amount of debits and credits.

Recording 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. Usually the record is made in journal entries. 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. If you get cash, you debit the cash account, but you have to credit something else. For example, in exchange for the cash you performed a service, which means you earned revenue which is an increase in capital, recorded as a credit. If you paid cash in exchange for your room rent, the rent is an expense, which is a reduction of capital, so it is recorded with a debit, and cash decreased so it is recorded as a credit. If you pay cash for a computer, you are increasing one asset, the computer, and decreasing the other asset, cash. You just have to decide what was exchanged before you worry about what to debit or credit.

You incurred a liability (gave a promise to pay later) so a liability is credited, and you received merchandise, which is asset that is debited. Or you got your promise back because you discharged the liability, so you debit the liability and credit the cash you paid.

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.

You have to understand that expenses are reduction in capital and revenues are increases in capital. That is why expenses are debits and revenues are credits. You could debit or credit the capital account directly when you have an expense or revenue, but then you would not be able to see the details of how capital changed. Expenses and revenues are just temporary subdivisions of capital that enable you to prepare an income statement and see why capital changed from operating a business.

In the first transaction you exchanged cash for rent, which is a service. Services are expenses because you cannot store them for future use. An expense is a reduction in capital so it is debited. You paid cash which reduces your cash account so cash is credited. In the second entry, you provided a service to a customer so that is an increase in capital, called revenue. You exchanged the service for a promise to be paid in cash later. That promise is called an account receivable, an asset that increased, so it is debited.

Almost anything can be a debit or credit. All those two words tell you is which side of the line in a T account (and also on journal paper / in a computer) the entry goes on. You need to learn in which accounts debit means increase and credit means decrease. Ditto, debit decreases some accounts, while cr increases them.

You answered your own question (or got confused in mid-stream). "cash in credit" means the entry goes on the right [credit] side of the T. a Dr increases the asset Cash while a Cr decreases cash [paid/ paying out].
Remember, the books must BALANCE, meaning each journal entry must balance.

JE201609-01
Dr Rent expense 2,500.00
Cr ........ Cash .................2,500.00
To record the paying of Sept 2016 rent.

JE201609-02
Dr A/R 49,770
Cr.......... Fees earned 49,770
To record completed jobs we will be paid for in future months.

and then ....
JE201610-xx [[ JE201610-01 would be the October 2016 rent payment, to keep uniformity]]
Dr Cash 49,770
Cr ......... A/R .. 49,770
Joe Blow Inc. paid what he owed us [[ so we have money in the bank and the A/R has been reduced to 0]]