ch02 - PREVIEW OF CHAPTER 2 PREVIEW THE RECORDING PROCESS...

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PREVIEW OF CHAPTER 2 PREVIEW OF CHAPTER 2 THE RECORDING PROCESS The Account Steps in the Recording Process The Recording Process Illustrated The Trial Balance ¾ ¾ ¾ Debits and credits Debit and credit procedures Stockholders’ equity relationships Expansion of basic equation ¾ Journal Ledger ¾ ¾ ¾ Summary of illustrations of journalizing and posting Limitations of a trial balance Locating errors Use of dollar signs ¾ ¾ ¾
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THE ACCOUNT THE ACCOUNT z An account is an individual accounting record of increases and decreases in a specific asset, liability, or stockholders’ equity item. z A company will have separate accounts for such items as cash , salaries expense , accounts payable , and so on.
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T ACCOUNT T ACCOUNT z The shape resembles the letter T, and therefore the account form is called a T account . Left or debit side _____________ Debit balance Right or credit side _____________ Credit balance Title of Account
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DEBITS AND CREDITS DEBITS AND CREDITS z debit means left and credit means right. z entering an amount on the left side of an account is called debiting the account and making an entry on the right side is crediting the account. z When the debit amounts exceed the credits, an account has a debit balance; when the reverse is true, the account has a credit balance.
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DEBITING AND CREDITING AN ACCOUNT DEBITING AND CREDITING AN ACCOUNT Cash Debits Credits 15,000 7,000 8,000 Example: Cash is debited for $15,000 and credited for $7,000, leaving a debit balance of $8,000. Example: Cash is debited for $15,000 and credited for $7,000 , leaving a debit balance of $8,000 .
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DOUBLE-ENTRY SYSTEM DOUBLE DOUBLE - - ENTRY SYSTEM ENTRY SYSTEM z For each transaction, debits must equal credits in the accounts. z The accounting equation will always stay in balance. Assets Liabilities Equity
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DEBIT AND CREDIT EFFECTS - ASSETS AND LIABILITIES DEBIT AND CREDIT EFFECTS - ASSETS AND LIABILITIES Debits Credits Increase assets Decrease assets Decrease liabilities Increase liabilities
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NORMAL BALANCES - ASSETS AND LIABILITIES NORMAL BALANCES - ASSETS AND LIABILITIES Normal Normal Balance Balance Assets Liabilities Increase Decrease Decrease Increase Debit Credit Debit Credit
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DEBIT / CREDIT EFFECTS & NORMAL BALANCE - COMMON STOCK DEBIT / CREDIT EFFECTS & NORMAL BALANCE - COMMON STOCK Common Stock Decrease Increase Debit Credit Normal Balance
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DEBIT AND CREDIT EFFECT AND NORMAL BALANCE - RETAINED EARNINGS DEBIT AND CREDIT EFFECT AND NORMAL BALANCE - RETAINED EARNINGS Decrease Increase Debit Credit Normal Balance Retained Earnings
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DEBIT AND CREDIT EFFECT AND NORMAL BALANCE - DIVIDENDS DEBIT AND CREDIT EFFECT AND NORMAL BALANCE - DIVIDENDS Dividends Increase Decrease Debit Credit Normal Balance
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NORMAL BALANCES - REVENUES AND EXPENSES NORMAL BALANCES - REVENUES AND EXPENSES Normal Normal Balance Balance Revenues Expenses Decrease Increase Increase Decrease Debit Credit Debit Credit
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This note was uploaded on 05/21/2011 for the course ACY 1111 taught by Professor Km during the Spring '10 term at CUHK.

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ch02 - PREVIEW OF CHAPTER 2 PREVIEW THE RECORDING PROCESS...

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