The document outlines basic accounting elements including balance sheets, income statements, and statements of retained earnings. It provides examples of journal entries for purchasing inventory on credit, borrowing money from a bank, and paying salaries. The examples demonstrate how accounting transactions are recorded by debiting asset and expense accounts and crediting liability and revenue accounts to maintain the balance sheet equation of assets = liabilities + owners' equity.

1. Basic Accounting Elements
Balance Sheet/
Income
Balance Sheet Stmt of Retained
Statement Earnings
Debit Asset Expense
Owners’
Credit Liability Revenue
Equity
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2. Example
• You purchase $80 worth of inventory for cash
Debit Credit
• Inventory . . . . . . . . . . . . . . . 80
• Cash . . . . . . . . . . . . . . ….. ………………….80
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3. Example
• The company borrowed $200 from a bank
• Increase in Assets (Cash) by $200
• Increase in Liabilities (Borrowings) by $200
• Journal Entry
Debit Credit
• Cash 200
• Borrowings 200
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4. Example
• Company paid $400 salary
• Increase in Expenses (Salaries Expense) by $400
• Decrease in Assets (Cash) by $400
• Journal Entry
Debit Credit
• Salaries Expense 400
• Cash 400
•

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