Review for AC202

Examplepurchasecomputerfor 10000bypaying6000incash

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Unformatted text preview: s in each category that are affected Determining if each affected account is being increased or decreased It is VERY important to learn to analyze a transaction before doing anything else. 12 The Account...what it is An individual accounting record of increases and decreases in a specific Asset, Liability, or Stockholders’ Equity item. 13 An Account has Three parts : 1) the Title of the account 2) a left or Debit side 3) a right or Credit side 14 The T Account TITLE DEBIT CREDIT DR CR 15 The Use of Ledger Accounts Increases are recorded on one side of the T­account, and decreases are recorded on the other side. Title of Account Left or Debit Side Right or Credit Side 16 Total the Entries to Each Side TITLE Debit Credit Total Debits Total Credits Then, subtract the smaller amount from the larger amount to come up with an account balance. Whichever side has the largest amount determines if it 17 is a debit balance or a credit balance. CASH 5 10 3 2 15 5 BAL 10 18 Examples 19 Double­Entry Accounting An account balance is the difference between the increases and decreases in an account. Did you notice that the “Cash” account keeps ending up with a debit balance? 20 Total the Entries to Each Side TITLE Debit Credit Total Debits Total Credits If the greater sum is on the left, the account has a Debit Balance 21 Total the Entries to Each Side TITLE Debit Credit Total Debits Total Credits If the greater sum is on the right, the account has a Credit Balance 22 Debits and Credits •Debit means left • thus, entry on left side is debiting • Credit means right • thus, entry on right side is crediting •Normal balance is the side on which the increase happens 23 Debits and Credits •Sometimes I “debit” to increase •Sometimes I “credit” to increase • How do I know which side to use? 24 Ledger Accounts This is the key to knowing whether to DEBIT or to CREDIT… and whether you are Increasing or Decreasing 25 Statement of Financial Position: A Starting Point Vagabond Travel Agency Balance Sheet December 31, 2002 Assets Liabilities & Owners' Equity Cash $ 22,500 Liabilities: Notes receivable 10,000 Notes payable $ 41,000 Accounts receivable 60,500 Accounts payable 36,000 Supplies 2,000 Salaries payable 3,000 Land 100,000 Total liabilities $ 80,000 Building 90,000 Owners' Equity: Office equipment 15,000 Capital stock 150,000 Retained earnings 70,000 Total $ 300,000 Total $ 300,000 As s e ts = Liabilitie s + Owne r’s Equity Do you see the T? Assets on the left; 26 Liabilities and Equity on the right Debit and Credit Rules Debits and credits affect accounts as Debits and credits affect accounts as ffollows: ollows: A = L + OE OE ASSETS LIABILITIES EQUITIES Debit Credit for for Increase Decrease Debit Credit for for Decrease Increase Debit Credit for for Decrease Increase In keeping with what we’ve learned 27 Double Entry Accounting The Equality of Debits and Credits A = L + OE OE = Debit balances Credit Credit balances balances In...
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This note was uploaded on 09/29/2013 for the course AC 202 taught by Professor Nancyeverett during the Fall '09 term at Park.

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