Ch+03+Edited

# 3 define debits and credits and explain their use in

This preview shows page 1. Sign up to view the full content.

This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: ers’ Equit y Credit / Cr. Debit / Dr. Debit / Dr. Debit / Dr. Credit / Cr. Normal Balance Normal Normal Balance Normal Chapter 3-23 Expense Debit / Dr. Revenue Chapter 3-25 Credit / Cr. Debit / Dr. Normal Balance Normal Chapter 3-27 3-27 Credit / Cr. Normal Balance Normal Chapter 3-26 SO 3 Define debits and credits and explain their use in recording business transactions. Summary of Debit/Credit Rules Summary of Debit/Credit Rules Balance Sheet Asset = Liability + Equity Income Statement Revenue - Expense = Debit Credit 3-28 SO 3 Define debits and credits and explain their use in recording business transactions. Summary of Debit/Credit Rules Summary of Debit/Credit Rules Relationship among the assets, liabilities and stockholders’ equity of a business: Illustration 3-16 Basic Equation Assets = Liabilities + Stockholders’ Equity Expanded Basic Equation The equation must be in balance after every transaction. For every Debit there must be a Credit. 3-29 SO 3 Define debits and credits and explain their use in recording business transactions. Summary of Debit/Credit Rules Summary of Debit/Credit Rules Review Question Debits: a. increase both assets and liabilities. b. decrease both assets and liabilities. c. increase assets and decrease liabilities. d. decrease assets and increase liabilities. 3-30 SO 3 Define debits and credits and explain their use in recording business transactions. Summary of Debit/Credit Rules Summary of Debit/Credit Rules Review Question Accounts that normally have debit balances are: a. assets, expenses, and revenues. b. assets, expenses, and equity. c. assets, liabilities, and dividends. d. assets, dividends, and expenses. 3-31 SO 3 Define debits and credits and explain their use in recording business transactions. 3-32 Steps in the Recording Process Steps in the Recording Process Illustration 3-17 Analyze each transaction Enter transaction in a journal Transfer journal information to ledger accounts Source documents, such as a sales slip, a check, a bill, or a cash register tape, provide evidence of the transaction. 3-33 SO 4 Identify the basic steps in the recording process. Steps in the Recording Process Steps in the Recording Process The Journal Book of original entry. Transactions recorded in chronological order. Contributions to the recording process: 1. Discloses the complete effects of a transaction. 2. Provides a chronological record of transactions. 3. Helps to prevent or locate errors because the debit and credit amounts can be easily compared. 3-34 SO 5 Explain what a journal is and how it helps in the recording process. The Journal The Journal Journalizing - Entering transaction data in the journal. Illustration: Presented below is information related to Sierra Corporation. Oct. 1 Sierra issued common stock in exchange for \$10,000 cash. 1 Sierra borrowed \$5,000 by signing a note. 2 Sierra purchased office equipment for \$5,000. Instructions - Journalize these transactions. 3-35 SO 5 Explain what a journal is an...
View Full Document

## This note was uploaded on 09/27/2013 for the course MGT 11A taught by Professor Armstrong during the Fall '08 term at UC Davis.

Ask a homework question - tutors are online