Here you can see a simple example:
If we assume a normal business transaction, for example, you go to a computer store and buy a computer program for 1 500 $ and pay cash.
Business event is recorded in the following manner:
Why are recorded business transaction in the above manner?
Checkout reduces – is an asset account – reduction on credit and the increase is in debit – Checkout reduces – the cash payment shall be recorded on the credit side of the account records 1910.
The cost increases – is an expense account – reduction on credit and the increase is in debit – costs increase – cost should be recorded on the debit side of the account records 5420.
Input VAT increase – is a private kapital-/skuldkonto – reduction on credit and the increase is in debit – input VAT increase – Therefore, the purchase of the computer program recorded on the debit side of the account records 2641 when the input VAT increase.