Your father runs a small auto body shop. He has decided to computerize his recor

Question

Your father runs a small auto body shop. He has decided to computerize his records and has asked you to explain the basics of accounting to him so that he can enter the data into his accounting software.
Explain to him the rules of debits and credits for the balance sheet and income statement.
Provide examples from the manufacturing industry of:
a journal entry that would be recorded that impacts the balance sheet.
a journal entry that would be recorded affecting the income statement.
Please provide the assumptions behind the transactions and the full journal entries.

Explanation / Answer

Any income should be credit to the income statement and any expense should be debited to the income statement. Similarly, any asset will have debit balance and liability will have credit balance. (a) Issue of share capital Cash A/c......Dr To Common Stock. (Common stock issued) This entry will not impact the income statement. The asset side and the liability side, both will increase by the same amount (b) Rent A/c.....Dr To cash (Rent paid for body shop floor space used) This entry will reduce the income statement and will also reduce the asset side of the balance sheet Happy to help!!!!!!!!

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