Accounting Review Questions.docx

Accounting Review Questions.docx - Page 110 1 An account...

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Page 110 1. An account contains the account name, and whether it is a debit or credit. 2. Add the two side of the account separately, then subtract the smaller total from the larger total. 3. The normal balance for an asset is debit, while for liabilities and owner’s equity, the normal balance is credit. (For assets, if the number goes up, it goes on the debit side, and on the credit side if it goes down. For liabilities and owner’s equity, it is flipped.) 4. Assets have a debit balance. 5. Liabilities and Owner’s Equity have a credit balance. 6. Exceptional balance occurs when an account that would normally have a debit balance ends up with a credit balance, or vice versa. 7. Situations that can lead to exceptional balance: Your business overpays an account payable, a purchaser return goods for credit to a supplier for whom there is no account balance 8. Overdraft protection is protection against the embarrassment and service charges that businesses have to suffer when a financial contract is made that allows a deposit account to go way below zero.
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