Scenario 1: Paying an expense with cash
If you paid an expense using cash, the entry would be:
* Debit: Expense Account (e.g., Rent Expense, Utilities Expense, Salaries Expense) [Increases expense]
* Credit: Cash Account [Decreases cash]
Scenario 2: Paying an expense with a check or electronic transfer from a checking account
This is essentially the same as paying with cash, just using a different account:
* Debit: Expense Account (e.g., Rent Expense, Utilities Expense, Salaries Expense) [Increases expense]
* Credit: Bank/Checking Account [Decreases bank balance]
Scenario 3: Paying an expense with a credit card
When you pay an expense with a credit card, you're not actually paying the expense yet; you're incurring a liability. The entry is:
* Debit: Expense Account (e.g., Rent Expense, Utilities Expense, Salaries Expense) [Increases expense]
* Credit: Credit Card Liability Account [Increases liability]
Later, when you pay your credit card bill:
* Debit: Credit Card Liability Account [Decreases liability]
* Credit: Bank/Checking Account [Decreases bank balance]
Example:
Let's say you paid $500 in rent using your checking account. The journal entry would be:
* Debit: Rent Expense $500
* Credit: Checking Account $500
Important Note: Always ensure the debit and credit amounts are equal. The debit and credit entries always need to balance. The specific expense account used will depend on the nature of the expense.