Chapter 3 Part 1 notes

Chapter 3 Part 1 notes - Dividends Revenues Expenses Income...

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Chapter 3 Part I – Debits and credits
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Now that we’ve analyzed the effect transactions have on the Accounting Equation We need to standardize the format Each transaction must be recorded in a manner that: o Is recognizable by General Ledger Software o Can be interpreted efficiently by accounting professionals o Accurately reflects the economic activity
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The Accounting word for “left” is DEBIT! Assets are “debit-handed” They are dominant on the left And weak on the right
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Assets are strong on the left Assets Strong on Left Weak on Right Dominant Assets
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Logical, isn’t it? Assets
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The Accounting word for “right” is CREDIT! Liabilities and Equity are “credit-handed” They are dominant on the right And weak on the left
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Liabilities and Equity are strong on the right Liabilities and Equity Strong on Right Weak on Left Dominant Liabilities and Equity
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Statement of Stockholders’ Equity Let’s take a closer look at Equity Stockholders’ Equity Contributed Capital
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Unformatted text preview: Dividends Revenues Expenses Income Statement Heres a trick to help you remember the four components of equity. Think of the Owner going for a R I D E R evenues I nvestments D ividends E xpenses Increase Equity Decrease Equity An items location in the accounting equation determines its STRONG side Assets Liabilities Equities The left-hand side of the equation goes up on the left; Assets Increase with debits Decrease with Credits Liabilities Increase with Credits Decrease with Debits Contributed Capital + with Credits the right-hand side of the equation goes up on the right! Retained Earnings + with Revenues-With Expenses-With Dividends RIDE! Journal Entries In the Computerized Environment Debit has + signs, while credits have signs For example 1. Bought equipment with cash for $5,000 Equipment $5,000 Cash-$5,000 2. Bought a car for $18,000 with a loan Car $18,000 Notes Payable-$18,000...
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Chapter 3 Part 1 notes - Dividends Revenues Expenses Income...

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