chapter 3 Tips PAGE 40

chapter 3 Tips PAGE 40 - CHAPTER 3 REVIEW OF THE ACCOUNTING...

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CHAPTER 3 REVIEW OF THE ACCOUNTING PROCESS IllUSTRATION 3-1 DOUBLE-ENTRY (DEBIT AND CREDIT) ACCOUNTING SYSTEM (L.O. 2) The debit and credit rules are summarized below: Asset Accounts Debit Credit Increase Decrease + - Liability Accounts Debit Credit Decrease Increase + Dividends Account Debit Credit I ncrease Decrease + Stockholders' Equity Account s Debit Credit Decrease Increase + Expense Accounts Debit Credit Increase Decrease + Revenue Accounts Debit Credit Decrease Increase + Normal Balance Nor mal Balance Notice that the accounts above are arranged in such a way that all of the increases ("+" signs) are on the outside and all of the decreases ("-" signs) are on the inside of this diagram. TIP: An account is an individual accounting record of increases and decreases in a specific asset, liability, or stockholders' equity item. 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. Because the
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