ch02(1) - 2 The Recording Process Learning Objectives 2-1 1 Describe how accounts debits and credits are used to record business transactions 2 Indicate

ch02(1) - 2 The Recording Process Learning Objectives 2-1 1...

This preview shows page 1 - 9 out of 47 pages.

2-1 The Recording Process 2 Learning Objectives Describe how accounts, debits, and credits are used to record business transactions. Indicate how a journal is used in the recording process. Explain how a ledger and posting help in the recording process. 3 Prepare a trial balance. 2 1 4
Image of page 1
2-2 Record of increases and decreases in a specific asset, liability, owners’ equity, revenue, or expense item. Debit = “Left” Credit = “Right” The Account An account can be illustrated in a T-account form. LEARNING OBJECTIVE Describe how accounts, debits, and credits are used to record business transactions. 1 LO 1
Image of page 2
2-3 Double-entry system Each transaction must affect two or more accounts to keep the basic accounting equation in balance. Recording done by debiting at least one account and crediting at least one other account. DEBITS must equal CREDITS . DEBIT AND CREDIT PROCEDURES The Account LO 1
Image of page 3
2-4 Transaction #2 Balance Transaction #1 Transaction #3 If the sum of Debit entries are greater than the sum of Credit entries, the account will have a debit balance. Debits and Credits LO 1 Account Name Debit / Dr. Credit / Cr.
Image of page 4
2-5 If the sum of Credit entries are greater than the sum of Debit entries, the account will have a credit balance. Transaction #2 Transaction #3 Balance Transaction #1 Debits and Credits LO 1 Account Name Debit / Dr. Credit / Cr.
Image of page 5
2-6 Assets - Debits should exceed credits. Liabilities – Credits should exceed debits. Normal balance is on the increase side. Expenses: Normal Balance is Debit Revenue: Normal Balance is credit Debits and Credits LO 1
Image of page 6
2-7 Owner’s investments and revenues increase owner’s equity (credit). Owner’s drawings and expenses decrease owner’s equity (debit). Debits and Credits Helpful Hint Because revenues increase owner’s equity, a revenue account has the same debit/credit rules as the Owner’s Capital account. Expenses have the opposite effect. LO 1
Image of page 7
2-8 Debits and Credits The purpose of earning revenues is to benefit the owner(s). The effect of debits and credits on revenue accounts is the same as their effect on Owner’s Capital. Expenses have the opposite effect: expenses decrease owner’s equity.
Image of page 8
Image of page 9

You've reached the end of your free preview.

Want to read all 47 pages?

  • Winter '17
  • Dr. Mahwish Anjum
  • Double-entry bookkeeping system, The Journal, s Capital, Lo

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

Stuck? We have tutors online 24/7 who can help you get unstuck.
A+ icon
Ask Expert Tutors You can ask You can ask You can ask (will expire )
Answers in as fast as 15 minutes