Debit and Credit(Using “T” Accounts)

Chapter 2Analyzing Transactions into Debit and Credit Parts

DO NOW: In your notebook

What do you know about debits and credits?

The Accounting Equation – It’s really not efficient

http://www.youtube.com/watch?v=PEXulul11dE

Let’s Break the Accounting Equation Down

Assets = Liabilities + Owner’s EquityRemember how we named OE transactions as Investment, Withdrawal, Revenue and Expense

The owner gave her own cash to the business for the business to useWe increased cash We increased Owner’s Equity, because the owner has a right to that moneyWe called it INVESTMENT

The owner took money out of the business to pay for something for herself– not business relatedWe decreased cash We decreased Owner’s Equity, because this $ wasn’t there for her to have the right to itWe called it Withdrawal

Let’s Break the Accounting Equation Down

Assets = Liabilities + Owner’s EquityRemember how we named OE transactions as Investment, Withdrawal, Revenue and Expense

A sale occurs We increased either cash or accounts receivableWe increased Owner’s Equity, because the owner has a right to that money received or coming inWe called it REVENUE

ORWe pay cash for a service (telephone bill, repairs, rent) that isn’t an assetWe decrease cash We decrease Owner’s Equity, because the owner is losing the rights to the cashWe called it EXPENSE

Let’s Break the Accounting Equation Down

Assets = Liabilities + Owner’s EquityRemember how we named OE transactions as Revenue and Expense?Let’s practice some of these:

Paid cash for charity:Decrease cash (asset), decrease Capital (OE) Expense

Sold services for cash: Increase cash (asset)Increase Capital (OE)

Revenue

Sold services to customerOn account:

Increase accounts receivable (asset),Increase Capital (OE)

Revenue

Paid cash for cleaning service to clean office:

Decrease cash (asset)Decrese Capital (OE)

Expense

The Expanded Accounting Equation

Assets = Liabilities + Owner’s Equity

Assets = Liabilities + Investment – Withdrawal + Revenue - Expense(Capital)

Accounting Terms

T account – Temporary account; an accounting device used to analyze transactions

Debit – an amount recorded on the left side of the T account

Credit – an amount recorded on the right side of the T account

T Account and Debits and Credits: The Increase-Decrease Secret

http://www.youtube.com/watch?v=DfX_mbbBsYo

– WITT

The Accounting Equation Debits & Credits Using T Accounts

http://www.youtube.com/watch?v=99LTqkxzBpA

Learning on the closet door

REVIEW IN PRINT

Textbook pages 28, 29, and 30

Increases and Decreases for the “T” Account

Two sides of an account are used to record increases and decreases to that account.

Any Asset Debit side increases (Left side and normal balance) Credit decreases (Right side)

Any Liability and OE Debit side decreases (left side) Credit side increases (right side and normal balance)

Account Balances

Normal Balance– The side of the account that increases

Assets – On the left side of the T – Have normal debit balances

Liabilities and OE– On the right side of the T– Have normal credit balances

Work Together

WP p. 21 Textbook p. 31

Work Together WP p. 22 Textbook p. 31

USE THE STEPS!

Debit/Credit Dance

http://www.youtube.com/watch?v=j71Kmxv7smk

TRANSACTION ANALYSIS

Step by step– Which accounts are affected?– How is each account classified?

Asset, liability, or owner’s equity account

– How is each classification changes? Increase or decrease

– How is each amount entered in the accounts? Debit or credit side

Received cash from owner as an investment $5000

1. Which accounts are affected?– Cash and Capital

2. How is each account classified?– Cash is an asset– Capital is an OE

3. How is each classification changed?– Assets: increase– OE: Increase

4. How is each amount entered in accounts?– Assets increase on the debit side

Debit the asset account cash– OE increase on the credit side

Credit the OE account capital

Paid cash for supplies $275.00

1. Which accounts are affected?– Supplies and Cash

2. How is each account classified?– Supplies is an Asset– Cash is an Asset

3. How is each classification changed?– One asset (supplies): increase– One asset (cash): decrease

4. How is each amount entered in accounts?– Assets increase on the debit side

Debit the asset account supplies– Assets decrease on the credit side

Credit the asset account cash

Paid cash for insurance $1,200

1. Which accounts are affected?– Prepaid insurance and cash

2. How is each account classified?– Prepaid insurance is an Asset– Cash is an Asset

3. How is each classification changed?– One asset (prepaid insurance): increase– One asset (cash): decrease

4. How is each amount entered in accounts?– Assets increase on the debit side

Debit the asset account prepaid insurance– Assets decrease on the credit side

Credit the asset account cash

Bought supplies on account $500

1. Which accounts are affected?– Supplies and Accounts Payable (Supply Depot)

2. How is each account classified?– Supplies is an Asset– Accounts Payable is a Liability

3. How is each classification changed?– Assets: increase– Liabilities: increase

4. How is each amount entered in accounts?– Assets increase on the debit side

Debit the asset account supplies– Liabilities increase on the credit side

Credit the liability account Accounts payable

Paid cash on account $300

1. Which accounts are affected?– Cash and Accounts Payable (Supply Depot)

2. How is each account classified?– Cash is an Asset– Accounts Payable is a Liability

3. How is each classification changed?– Assets: decrease– Liabilities: decrease

4. How is each amount entered in accounts?– Assets decrease on the credit side

Credit the asset account cash– Liabilities decrease on the debit side

debit the liability account Accounts payable

Practice

Work Together – WP p.23– Textbook p. 27

HOMEWORK: Study Guide 2: WP p. 17 Study Guide Part Three: WP p. 19, #’s 1 – 8 On Your Own

– WP p. 24– Textbook p. 37`

Analyzing Trasactions: OE Accts

Receive cash from sales $295

1. Which accounts are affected?– Cash and Sales

2. How is each account classified?– Cash is an asset– Sales is an OE (revenue)

3. How is each classification changed?– Assets: increase– OE: Increase

4. How is each amount entered in accounts?– Assets increase on the debit side

Debit the asset account cash– OE increase on the credit side

Credit the revenue account sales

Sold services on account $350

1. Which accounts are affected?– Accounts receivable and Sales

2. How is each account classified?– AR is an asset– Sales is an revenue account that affects OE

3. How is each classification changed?– Assets: increase– OE: Increase

4. How is each amount entered in accounts?– Assets increase on the debit side

Debit the asset account AR– OE increase on the credit side

Credit the revenue account sales (OE)

Paid cash for an expense (Rent) $300

1. Which accounts are affected?– Cash and Rent Expense

2. How is each account classified?– Cash is an asset– Rent Exp is an OE

3. How is each classification changed?– Assets: decrease– OE: decreases

4. How is each amount entered in accounts?– OE decrease on the debit side

Debit the rent expense account– Assets decrease on the credit side

Credit the asset account cash

Received cash on account $200

1. Which accounts are affected?– Cash and Accounts receivable

2. How is each account classified?– Cash is an asset– AR is an asset

3. How is each classification changed?– Assets: (cash) increase– Assets: (AR) decreases

4. How is each amount entered in accounts?– Assets increase on the debit side

Debit the asset account cash– Assets decrease on the credit side

Credit the asset account AR

Paid cash to owner for personal use $125

1. Which accounts are affected?– Cash and Owner, Drawing

2. How is each account classified?– Cash is an asset– Owner Drawing is an OE

3. How is each classification changed?– Assets: decrease– OE: decreases

4. How is each amount entered in accounts?– OE decreases on the debit side

Debit the OE account Owner Drawing– Assets decrease on the credit side

Credit the asset account cash

REVIEW ACTIVITIES

– http://www.quia.com/cm/63252.html Quia game matching transactions and vocab