The following shows how the individual transactions affect the accounts. Each transaction affects the balance of an account, and they must be viewed as a whole to determine the ending balance (current balance). The reference number preceding the dollar amount denotes the transactions numbered and explained above. The balance of the account is shown following the double asterisk on the debit or credit side of the account.
When the above transactions are viewed as a whole several things become apparent. The cash account has a debit balance of $250.00: you have money. The AAA Auto Receivable account has a debit balance of $300.00: they still owe you. Expenses total $350.00, $50.00 for the office supplies and $300.00 for the note interest. The car still has a worth of $20000.00; however, normally some reduction of it’s value would occur by posting a depreciation transaction, i.e.. debit accumulated depreciation and credit car. The note balance was reduced and now has a balance of $19800.00. Sales were $1100.00 for the period.
