Ch+03+Edited

Helps in the recording process the account the

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Unformatted text preview: iting another. ► 3-20 Each transaction must affect two or more accounts to keep the basic accounting equation in balance. DEBITS must equal CREDITS. must SO 3 Define debits and credits and explain their use in recording business transactions. Debit and Credit Procedures Debit and Credit Procedures If Debits are greater than Credits, the account will greater have a debit balance. Account Name Debit / Dr. Credit / Cr. Transaction #1 $10,000 $3,000 Transaction #3 8,000 Balance 3-21 Transaction #2 $15,000 SO 3 Define debits and credits and explain their use in recording business transactions. Debit and Credit Procedures Debit and Credit Procedures If Credits are greater than Debits, the account will have a credit balance. Account Name Debit / Dr. Balance 3-22 $10,000 $3,000 Transaction #2 8,000 Transaction #1 Credit / Cr. Transaction #3 $1,000 SO 3 Define debits and credits and explain their use in recording business transactions. Dr./Cr. Procedures for Assets and Liabilities Dr./Cr. Procedures for Assets and Liabilities Asset s Credit / Cr. Assets - Debits should exceed credits. Debit / Dr. Liabilities – Credits should exceed debits. The normal balance is on the increase side. Normal Balance Normal Chapter 3-23 Liabilit ies Debit / Dr. Credit / Cr. Normal Balance Normal Chapter 3-24 3-23 SO 3 Define debits and credits and explain their use in recording business transactions. Dr./Cr. Procedures for Stockholders’ Equity Dr./Cr. Procedures for Stockholders’ Equity Debit / Dr. Owner’s investments and revenues increase stockholders’ equity (credit). St ockholders’ Equit y Dividends and expenses decrease stockholder’s equity (debit). Credit / Cr. Normal Balance Normal Chapter 3-25 Common St ock Debit / Dr. Ret ained Earnings Credit / Cr. 3-24 Chapter 3-25 Credit / Cr. Debit / Dr. Normal Balance Normal Debit / Dr. Normal Balance Normal Chapter 3-25 Dividends Credit / Cr. Normal Balance Normal Chapter 3-23 SO 3 Define debits and credits and explain their use in recording business transactions. Dr./Cr. Procedures for Revenue and Expense Dr./Cr. Procedures for Revenue and Expense The purpose of earning revenues is to benefit the stockholders. The effect of debits and credits on revenue accounts is the same as their effect on stockholders’ equity. Debit / Dr. Revenue Expenses have the opposite effect: expenses decrease stockholders’ equity. Credit / Cr. Normal Balance Normal Chapter 3-26 Expense Debit / Dr. Normal Balance Normal Chapter 3-27 3-25 Credit / Cr. SO 3 Define debits and credits and explain their use in recording business transactions. Stockholders’ Equity Relationships Stockholders’ Equity Relationships Illustration 3-15 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 Liabilit ies Normal Normal Balance Balance Debit Debit Normal Normal Balance Balance Credit Credit Asset s Credit / Cr. Normal Balance Normal Chapter 3-24 St ockhold...
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