Accounting Principles-Lecture 5_2.pdf - Accounting Principles Lecture 5 Chapter 2 contd the recording process Dr Mohamed Elmaghrabi 1 Summary of

Accounting Principles-Lecture 5_2.pdf - Accounting...

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11/6/2016 1 Accounting Principles Lecture 5 Chapter 2 cont’d: the recording process 1 Dr. Mohamed Elmaghrabi Assets Liabilities = Basic Equation Expanded Basic Equation + Summary of Debits/Credits Rules Relationship among the assets, liabilities and owner’s equity of a business: The equation must be in balance after every transaction. For every Debit there must be a Credit . Owner’s Equity 2 Dr. Mohamed Elmaghrabi
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11/6/2016 2 The Account An account is an individual accounting record of increases and decreases in a specific asset, liability, or owner’s equity item. There are separate accounts for the items we used in transactions such as cash, salaries expense, accounts payable, etc. 3 Dr. Mohamed Elmaghrabi Basic Form of Account In its simplest form, an account consists of three parts: 1. the title of the account, 2. a left or debit side, and 3. a right or credit side. The alignment of these parts resembles the letter T. Therefore, it is referred to as a T- account. 4 Dr. Mohamed Elmaghrabi
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11/6/2016 3 5 Dr. Mohamed Elmaghrabi Debits and Credits The term debit and credit mean in accounting left and right , respectively Recording an amount on the left side of an account is called debiting the account. Recording an amount on the right side is called crediting the account. Debit is abbreviated as Dr. and credit is abbreviated as Cr. The balance of an account is the difference between the total amount recorded on the debit side, and the total amount recorded on the credit side. If the total of debit amounts is bigger than the total of the credit amounts, the account will have a debit balance . If the total of credit amounts is bigger than the total of the debit amounts, the account will have a credit balance. 6 Dr. Mohamed Elmaghrabi
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11/6/2016 4 Steps in the Recording Process The basic steps in the recording process are: 1. Analyze each transaction in terms of its effect on the accounts (increase, or decrease). 2. Enter the transaction information in a journal (book of original entry).
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  • Fall '16
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  • Accounting, Generally Accepted Accounting

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