To illustrate the debits and credits of journal entries let me provide some examples.
1. Let us say that the company was able to collect receivable from customers.
Take note that both Cash and Accounts Receivable Accounts are assets, since the normal balance of an asset account is debit; debiting an asset is increasing its balance, while crediting it will decrease the balance.
With this transaction you record your cash by a debit for the amount that was collected and reduce the balance of your receivable by crediting Accounts Receivable.
2. The company purchased an equipment and paid cash of $5000. This example is very similar to the first one since both are asset accounts – Equipment and Cash. You already know the normal balance of an asset account, so try preparing the entry and check your answer.
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3. Using the same example above, let us say however that instead of paying cash we purchased the equipment on credit.
The normal balance of a liability account is Credit, therefore we added $5,000 as liability in the books of the company.
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4. To record payment of September rent expense of $4,000; the entry is to debit Rent Expense and credit Cash.
For income and expense, the normal balance is credit and debit respectively.
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5. To record Sales on account amounting to $500. In this example we increase our receivable balance by a debit to Accounts Receivable and also increase income by a credit to Sales account.
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The purpose of these examples is to learn about debits and credits. Note that recognizing income and expense varies depending on the accounting method being used by a business, whether it is Cash Basis or Accrual Basis.