Which accounts, which element, up or down, therefore which side

The four questions

Every transaction on the paper is analysed the same way, and the analysis is the method mark:

1. Which accounts are affected? Name two or more from the chart.
2. Which element is each one — asset, liability, equity, revenue, expense, dividends?
3. Does each one increase or decrease?
4. Therefore, which side — the rule from L4.1 turns question 3 into a debit or a credit.

Then write it and check that the debits equal the credits. An entry that does not balance is not "nearly right"; it breaks the equation, and the paper gives it nothing.

Worked example — Pinecrest pays its rent

On 1 November Pinecrest Physio Inc., a Guelph physiotherapy clinic, pays $2,400 rent for November.

1. Which accounts? Rent Expense and Cash.
2. Which element? Rent Expense is an expense; Cash is an asset.
3. Up or down? The expense has increased (a month of rent has been used); the asset has decreased.
4. Which side? An expense increases with a debit; an asset decreases with a credit.

Nov 1   Rent Expense                      2,400
            Cash                                    2,400
        Paid November rent.

That block is the journal entry, and its typography is part of the answer. The date first. The debit line first, flush left, with its amount in the left column. The credit line indented, with its amount in the right column. Then a one-line explanation of what happened. Totals equal: 2,400 = 2,400.

Why not Prepaid Rent? Because the month being paid for is the current one: the benefit is consumed as it is paid, so there is no asset to carry forward. Had Pinecrest paid on 1 November for November and December, the entry would debit Prepaid Rent — and a case that says "for the next three months" is telling you exactly that.

Three more, faded

A treatment table bought for $3,800 on account. Equipment (asset, up, debit) and Accounts Payable (liability, up, credit). Not Cash — nothing was paid — and not Repairs Expense — a table with years of use is an asset, not a cost of the month.

Patients treated for $5,600 cash. Cash (asset, up, debit) and Service Revenue (revenue, up, credit). Not Retained Earnings: revenue will reach retained earnings when the books are closed in Module 6, but the entry names the revenue account, so that the income statement can be built from it.

A $500 deposit received for a block of sessions not yet delivered. Cash (asset, up, debit) and Unearned Revenue (liability, up, credit). Not Service Revenue: nothing has been earned. This is the single most-tested confusion in the module, and question 2 — which element? — is what catches it. A deposit is an obligation.

The explanation line is not optional

On the paper, when an account is wrong, the explanation line is where the marker looks for the method: "recorded the deposit as a liability until earned" earns something even beside a wrong account name. Write it every time, in the case's words.