Review for AC202

Owne rs equity do you see the t assets on the left 26

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Unformatted text preview: the double-entry accounting system, In the double-entry accounting system, every transaction is recorded by equal every transaction is recorded by equal dollar amounts of debits and credits. dollar amounts of debits and credits. 28 In the double-entry accounting system, In the double-entry accounting system, every transaction is recorded by equal every transaction is recorded by equal dollar amounts of debits and credits. dollar amounts of debits and credits. If we debit “Cash” for $20 We must then credit another account for $20 This will keep our accounting equation in balance! 29 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 However, there is a complication. 30 Owner’s Equity Consists of Common Stock Preferred Stock Paid in Capital in excess of Par Retained Earnings These would be credited to increase, debited to decrease Retained Earnings also Consists of Income Less Expenses Less Dividends Paid (or declared) 31 Owner’s Equity Consists of Common Stock (credit to increase) Preferred Stock (credit to increase) Paid in Capital in excess of Par Treasury Stock Increases retained earnings (credit) Retained Earnings (credit to increase) Decreases retained earnings (debit) Income Less Expenses Also decreases retained earnings (debit) Less Dividends Paid (or declared) 32 Owners’ Equity (Credit to Increase) Common Stock (credit to increase) Retained Earnings (credit to increase) Income (credit to increase) Less Expenses (debit to increase the expenses which decreases Owners’ Equity) Less Dividends Paid (debit to increase dividends that were paid which decreases Owners’ 33 Debits Increase assets, expenses, and dividends Decrease liabilities, common stock, and revenues 34 Credits Decrease assets, expenses, and dividends Increase liabilities, common stock and revenues 35 Debits Credits Increase assets and Decrease assets and expenses expenses Increase liabilities, Decrease liabilities, common common stock and stock and revenues revenues 36 WHAT IS THE “NORMAL” BALANCE of EACH ACCOUNT? Whatever side you use to “increase” the account is the “normal” balance. 37 Normal Balances for Assets and Liabilities 38 Normal Balances for Stockholders’ Equity 39 Normal Balances for Expenses and Revenues 40 Whichever side you increase is the normal balance! 41 Expansion of Basic Equation You fill find this on the inside back cover of your text as well as on page 113. 42 Basic Steps in the Recording Process. 1.Analyze 2.Journalize 3.Post 43 Recording Process Step 1 Analyze each transaction and effect on accounts 44 ANALYZE THE TRANSACTION June 1 Issues common stock to investors in exchange for $2,500 cash Debit—Cash Credit—Common stock 45 ANALYZE THE TRANSACTION June 2 Buys equipment on account for $900 Debit—Equipment...
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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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