Entry Increase in assets is recorded by a debit to cash.

Decrease in
assets is recorded by a credit to accounts receivable.

Dr. Cr.

Cash (A) 24,000

Accounts Receivable (A) 24,000

Expenses Incurred and Paid (Use of Assets)

May 31 Settled the electricity bill of P3,000 for the month.

Analysis Assets decreased. Owner's equity decreased.

Rules Decreases in assets are recorded by credits. Decreases in owner
equity are recorded by debits.
Entry Decrease in owner's equity is recorded by a debit to utilities
expense. Decrease in assets is recorded by a credit to cash.

Dr. Cr.
Utilities Expense (OE:E) 3,000
Cash (A) 3,000

THE LEDGER

A grouping of the entity's accounts is referred to as a ledger. Although some firms may
use various ledgers to accumulate certain detailed information, all firms have a general
ledger. A general ledger is the "reference book" of the accounting system and is used to
classify and summarize transactions, and to prepare data for basic financial statements.

The accounts in the general ledger are classified into two general groups:
1. balance sheet or permanent accounts (assets, liabilities and owner's equity).
2. income statement or temporary accounts (income and expenses). Temporary
or nominal accounts are used to gather information for a particular accounting
period. At the end of the period, the balances of these accounts are transferred
to a permanent owner's equity account.

Each account has its own record in the ledger. Every account in the ledger maintains
the basic format of the T-account but offers more information (e.g. the account number
at the upper right corner and the journal reference column). Compared to a journal, a
edger organizes information by account