Week 1 Notes - AC201

You have a debit card from the bank so when you use

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You have a debit card from the "bank", so when you use it (the debit card) your cash goes down. Thus you think that you are debiting your account--you are not--you are debiting the bank's liability account under your name. You are withdrawing money deposited in the bank under their liability account, it is going down, they do not owe you as much money. Thus, they debit their liability account under your name, and credit the cash in their asset account. Their cash went down, and the amount they owe you went down.   An example Assets: Cash is given at $8,000 A/R is given at 10,000 Office equipment is given at 12,000 Building is given at 28,000 Trucks is given at 55,000 Thus the Assets total $113,000 Liabilities: a/p $18,000 Note payable 45,000 so liabilities total 63,000 If the accounting equation is A= L + OE then A - L = OE Therefore: $113,000 - $63,000 then OE = 50,000 Thus Liabilities is $63,000 O/E is 50,000 total liabilities and OE is $113,000 Proof: 113,000 = 113,000 So basically if you have to given Liabilities and Assets you can adjust the the balanced formula to get the missing factor.  A = L + E or A - L = E or A - E = L Please note that any economic transaction can be entered into the General Journal. What preventative measures do you think people can use to protect themselves from unethical behavior  of an accountant? A few things: . Check their financial condition . Check credit history . Check their credentials . Check their background, past positions . Good interview
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. Management in the field talk with them, determine their responsiveness to direct and specific questions . Psychological test including ethical questions . Self bonding Accounts are used to record business transactions. They are simply a record of all the increases and  decreases in a financial statement; for instance, cash, office supplies, or an account payable (you  borrowed money from someone or another company). A group of accounts is called a ledger. A chart of  accounts is simply a listing of the numbers assigned to the various accounts; for instance, Cash is  numbered 101. Assets begin with the number 1, liabilities number 2, owners equity number 3, revenue  accounts are number 4 and expenses number 5. Companies will have the same categories of accounts  but titles and numbers may vary, but they will follow this structure For simplicity in teaching and learning accounting, instructors use what are called T accounts. Look at an  illustration in your text book of a ledger account. Notice that the DR and CR columns form a T, this is  where the T account got its name. The left side of the T account is the debit DR and the right side is the  credit CR. You must understand DR's and CR's before moving on. The important thing is to remember  which accounts are increased with DRs and which are increased with CRs. Let us go back and look at the 
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