Ch03 Lecture Notes

Credit cr transaction1 10000 3000 transaction3 8000

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Unformatted text preview: redits Debits If Debit entries are greater than Credit entries, the greater account will have a debit balance. Account Name Debit / Dr. Credit / Cr. Transaction #1 $10,000 $3,000 Transaction #3 8,000 Balance 8 $15,000 Transaction #2 Debits and Credits Debits and Credits Debits If Credit entries are greater than Debit entries, the greater account will have a credit balance. Account Name Debit / Dr. Transaction #1 9 $3,000 Transaction #2 8,000 Balance $10,000 Credit / Cr. Transaction #3 $1,000 Debits and Credits Summary Debits and Credits Summary Liabilit ies Normal Normal Balance Balance Debit Debit Normal Normal Balance Balance Credit Credit Asset s Credit / Cr. Normal Balance Normal Chapter 3-24 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 10 Credit / Cr. Normal Balance Normal Chapter 3-26 The Accounting Equation The Accounting Equation Relationship among the assets, liabilities and stockholders’ equity of a business: Illustration 3-3 The equation must be in balance after every transaction. For every Debit there must be a Credit. 11 Double-Entry System Illustration Double-Entry System Illustration 1. Owners invest $40,000 in exchange for common stock. Assets Assets + 40,000 12 = Liabilities Liabilities + Stockholders’ Stockholders’ Equity Equity + 40,000 Double-Entry System Illustration Double-Entry System Illustration 2. Disburse $600 cash for secretarial wages. Assets Assets - 600 = Liabilities Liabilities + Stockholders’ Stockholders’ Equity Equity - 600 (expense) 13 Double-Entry System Illustration Double-Entry System Illustration 3. Purchase office equipment priced at $5,200, giving a 10 percent promissory note in exchange. Assets Assets + 5,200 14 = Liabilities Liabilities + 5,200 + Stockholders’ Stockholders’ Equity Equity Double-Entry System Illustration Double-Entry System Illustration 4. Received $4,000 cash for services rendered. Assets Assets + 4,000 = Liabilities Liabilities...
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This document was uploaded on 02/14/2014.

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