Let's look at an example. Suppose a company purchases $100 of inventory and pays with cash. Let's record a journal entry and then post that journal entry to the individual T-accounts that are affected. Now remember, to record a journal entry we have to know four things. You have to know what accounts are affected, what type of accounts those are, whether the account balance is increasing or decreasing, and by what dollar amount. So let's put up our balance sheet equation and answer those questions. What accounts are affected? Well, we're paying cash. So, we know that the company's paying cash. So we know that cash is affected. Cash is an asset. And the company is getting something in return for that cash. It's getting inventory, so inventory is affected. Both of these are asset accounts, that's the type of account. Are the accounts increasing or decreasing? Well, cash is decreasing, we're paying cash. Inventory is increasing, we're getting cash in exchange for that. We're getting inventory in exchange for that cash. The dollar amount. $100. Okay, so now that we've answered our four questions, let's record the journal entry. Remember, we want to identify what the left-hand side portion of the entry is, or the debit portion, and we'll record it first. Cash is an asset. It's decreasing. Decreases in assets are recorded as credits or right side. So that would not be where we would start. Inventory is an asset. It's balance is increasing. Increases in assets are left side or debit entries, so we'll start there. So let's put our account name, inventory. Let's indicate that it's an asset account. It's balance is increasing by $100 dollars. Okay, that's the left side of the entry. Now we can move to the right side of the entry and indent it slightly under the left side. Cash, as asset account, is decreasing. That's a right side, or a credit entry. Cash asset account decreasing by 100. Very simple. It's all we have to do to write our journal entry. Once we've written the journal entry, that journal entry gets posted into the individual accounts. So let's do that. We have two accounts that are affected. So let's create a T-account for each one. I always like to put the type of the account out beside the account title just so that I don't forget. Okay, so I've got a T-account for each of the accounts that are affected by the journal entry. So now, let's post this journal entry to the individual T-accounts. Inventory, which is an asset, increased by 100, and we made a left-hand side to that account. So let's post that to the left-hand side of the inventory T-account. Cash, which is an asset Decreased by 100. That was a right-side entry, or a credit entry, to the cash account. So we would, of course, then put that as a right-side entry to the cash T-account. That's all we need to do to post The journal entry to the individual accounts. Now, recall there's a couple of things we needed to check on. The first is we needed to make sure that the left-side entries and the right-side entries were equal. Both are 100, so we're pretty happy about that and feel quite good about that. Now, let's move back to the balance sheet equation. We know that after every transaction that we record, the balance sheet equation should remain in balance. This is the ultimate truth in accounting, and so that equation always has to hold. So let's just make sure that that's the case here. All right, we recorded a right-side to cash that decreased by 100. So, assets go down by $100. We made a left-side to inventory which is an increase in inventory. Inventory went up by 100. That's an increase in assets of 100. Assets went down by 100, up by 100, so the net effect on assets is equal to zero. So that side of the equation remains in total unchanged. We also know that this transaction caused no effect on liabilities or owner's equity. So that side of the equation remains unchanged as well. Both sides of the equation in net remain unchanged. The equation remains in balance. So we are Happy today.