Page 44 - Account for Ag - 2019

5-2 Accounting for Agriculture CH 5]

popular T account, so called because it resembles the letter T, we find the two opposite sides (debit and credit) to
be identical. However, in the more recently devised standard account, instead of having two sides, there are
provided two money columns, one for debits and one for credits, and a third column to allow the balance of the
account to be shown at all times.

THREE COLUMN ACCOUNT FORM WITH BALANCE COLUMN
Note in Illustration 5-2 that the same information has been illustrated and records in both of the accounts.
However, in the standard 3-column account it is possible to know the amount of the balance of the account every
time that an entry is made, but in the T account it is necessary to add all debits together, then add all credits
together, and subtract the credits from the debits in order to know the balance. In the standard account, an
additional column entitled "DR or CR" is provided in front of the balance column so that the bookkeeper may
indicate whether the balance is a debit balance or a credit balance.

Name: CASH Account No. 110 Page No. 1

Date Item Ref Debits Credits Balance
20xx
01/01 Investment  120000.00 120000.00
01/12 Land  38000.00 82000.00
02/03 Buildings  21500.00 60500.00
02/04 Equipment  9500.00 51000.00
02/17 Machinery  5260.00 45740.00
03/09 Livestock Purchased  1736.00 44004.00
03/09 Farm Supply Co.  1364.00 42640.00
03/31 Misc. Parts  169.85 42470.15
07/19 Crop Sales  9346.00 51816.15
07/26 Irrigation Co.  2550.00 49266.15
09/15 Livestock Sales– Purch  13436.00 62702.15
10/21 Crop Sales  6295.00 68997.15
10/29 Livestock Sales—Purch  7536.52 76533.67
10/29 Personal Withdrawal  750.00 75783.67

Illustration 5-2 Three Column Account (Running Balance Form)

THE THEORY OF DEBIT AND CREDIT
Balance Sheet Accounts. It has been observed that for asset accounts the left side is used for recording
increases and the right side is used for recording decreases. For liability and equity accounts the procedure is just
the reverse, the right side being used to record increases and the left side to record decreases. It has also been
emphasized that for all accounts, whether asset, liability, or equity, the left side is called the debit side and the
right side is called the credit side. It may therefore be said that:

DEBIT means : CREDIT means :
Increase in Asset Accounts Decrease in asset accounts
Decrease in liability accounts Increase in Liability accounts
Decrease in equity accounts Increase in equity accounts

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