Using T Accounts / Analyzing the Accounting Equation.
23
CHAPTER 2-1 Using T Accounts / Analyzing the Accounting Equation
-
Upload
wilfrid-lawrence -
Category
Documents
-
view
218 -
download
0
Transcript of Using T Accounts / Analyzing the Accounting Equation.
CHAPTER 2-1Using T Accounts /
Analyzing the Accounting Equation
Assets = Liabilities + OE
Accounting Equation
LEFT SIDE RIGHT SIDE
DEBIT CREDIT
Assets = Liabilities + OE
Debit
Debit
Credit
Credit
Debit Credit
Any Asset
Any Liability
Any Owners Equity
Normal Balance
Normal Balance
Normal Balance
Account Balances
Incre
as
e
Decre
as
e
Decre
as
eD
ecre
as
e
Incre
as
eIn
cre
as
e
Definitions
T Account: An accounting device used to analyze transactions.
Debit: The number recorded on the left side of the equation.
Credit: The number recorded on the right side of the equation.
Normal Balance: The side of the account that is increased .
CHAPTER 2-2ANALYZING HOW
TRANSACTIONS AFFECT ACCOUNTS
Assets = Liabilities + OE
Debit
Debit
Credit
Credit
Debit Credit
Any Asset
Any Liability
Any Owners Equity
Normal Balance
Normal Balance
Normal Balance
Account Balances
Incre
as
e
Decre
as
e
Decre
as
eD
ecre
as
e
Incre
as
eIn
cre
as
e
Chart of Accounts
A list of all accounts used by a business is called a Chart of Accounts
Steps for Analyzing a Transaction into Debit and Credit Parts
1. Which accounts are affected? Cash, Supplies, Capital, Accounts Payable, etc.
2. How is each account classified? Asset, Liability, or Owner’s Equity
3. How is each classification changed? Increases or Decreases?
4. How is each amount entered into the account? Debit Side or Credit Side? Increase or
Decrease?
DEBITS MUST EQUAL CREDITS ON EACH TRANSACTION! TOTAL DEBITS MUST EQUAL TOTAL CREDITS!
Assets = Liabilities + OE
Kim Park, CapitalCASHDebit Credit Debit Credit
$5,000 $5,000
August 1. Received Cash from owner as an investment, $5,000
Normal Balance
Normal Balance
Assets = Liabilities + OESupplies
Debit Credit
$275.00
August 3. Paid Cash for Supplies, $275.00
Cash
Debit Credit
Normal Balance
Normal Balance $275.00
Assets = Liabilities + OEPrepaid Insurance
Debit Credit
$1,200.00
August 4. Paid Cash for Insurance, $1,200.00
Cash
Debit Credit
Normal Balance
Normal Balance $1,200.00
Assets = Liabilities + OE
AP – Supply DepotSuppliesDebit Credit Debit Credit
$500.00 $500.00
August 7. Bought Supplies on account from Supply Depot, $500.00
Normal Balance
Normal Balance
Assets = Liabilities + OE
AP – Supply DepotCashDebit Credit Debit Credit
$300.00 $300.00
August 11. Paid Cash on account to Supply Depot, $300.00
Normal Balance
Normal Balance
DO NOW: On Your Own Pg. 37
Home Work: Application problem 2-2 Pg. 46
CHAPTER 2-3ANALYZING HOW
TRANSACTIONS AFFECT OWNER’S EQUITY
ACCOUNTS
SALES ACCOUNTS
Revenue increases Owner’s Equity HOWEVER, to avoid a Capital account
with a large number of entries and to summarize revenue records separately, TechKnow Consulting uses a separate revenue account titled SALES.
Assets = Liabilities + OE
SalesCashDebit Credit Debit Credit
$295.00 $295.00
August 12. Received cash from sales, $295.00
Normal Balance
Normal Balance
Assets = Liabilities + OE
SalesAR - Oakdale School
Debit Credit Debit Credit
$350.00 $350.00
August 12. Sold services on account to Oakdale School, $350.00
Normal Balance
Normal Balance
EXPENSE ACCOUNTS
Expenses decrease Owner’s Equity HOWEVER, to avoid a Capital account
with a large number of entries and to summarize information separately, TechKnow Consulting uses separate Expense Accounts.
Expense Accounts have NORMAL DEBIT BALANCES!! Debit Credit
Normal Balance
Credit
Assets = Liabilities + OE Capital
CashDebit Credit
Debit Credit
$300.00
$300.00
August 12. Paid cash for rent, $300.00
Normal Balance
Normal Balance
DebitNormal Balance
Rent Expense
Assets = Liabilities + OECash
Debit Credit
$200.00
August 18. Received cash on account from Oakdale School.
AR – Oakdale School
Debit Credit
Normal Balance
Normal Balance $200.00
PAID CASH TO OWNER FOR PERSONAL USE
Withdrawals decrease Owner’s Equity HOWEVER, to avoid a Capital account with a
large number of entries and to summarize information separately, TechKnow Consulting uses a separate Withdrawal account titled, Kim Park, Drawing.
Withdrawal Accounts have NORMAL DEBIT BALANCES!!
Debit CreditNormal Balance
Credit
Assets = Liabilities + OE Capital
CashDebit Credit
Debit Credit
$125.00
$125.00
August 18. Paid cash to owner for personal use, $125.00.
Normal Balance
Normal Balance
DebitNormal Balance
Kim Park, Drawing
