Section 2 Applying the Rules of Debit and Credit What You Why It

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Section 2 Applying the Rules of
Debit and Credit
What You’ll Learn
 How to analyze a transaction affecting
assets, liabilities, and owner’s equity.
Why It’s Important
You need to analyze transactions
properly so that you record them
correctly.
Section 2 Applying the Rules of Debit and Credit
(cont'd.)
Business Transaction Analysis:
Steps to Success
Business Transaction
ANALYSIS Identify
1. Identify the accounts affected.
Classify
2. Classify the accounts affected.
+/-
3. Determine the amount of
increase or decrease for each
account affected.
Section 2 Applying the Rules of Debit and Credit
(cont'd.)
Business Transaction Analysis:
Steps to Success (cont'd.)
Business Transaction
DEBIT-CREDIT RULE 4. Which account is debited? For
what amount?
5. Which account is credited? For
what amount?
Section 2 Applying the Rules of Debit and Credit
(cont'd.)
Business Transaction Analysis:
Steps to Success (cont'd.)
Business Transaction
T ACCOUNTS
6. What is the complete entry in
T-account form?
Account Name
Account Name
Section 2 Applying the Rules of Debit and Credit
(cont'd.)
Business Transaction Analysis
(cont'd.)
Business Transaction 1 (cont'd.)
On October 1, Maria Sanchez took $25,000 from
personal savings and deposited that amount to open a
business checking account in the name of Roadrunner
Delivery Service.
T ACCOUNTS
Cash in Bank
Maria Sanchez,
Capital
Debit
Credit
+
+
25,000
25,000
Section 2 Applying the Rules of Debit and Credit
(cont'd.)
Business Transaction Analysis
(cont'd.)
Business Transaction 3 (cont'd.)
On October 4, Roadrunner issued Check 101 for
$3,000 to buy a computer system.
T ACCOUNTS
Computer
Equipment
Cash in Bank
Debit
Credit
+
–
3,000
3,000
Section 2 Applying the Rules of Debit and Credit
(cont'd.)
Business Transaction Analysis
(cont'd.)
Business Transaction 4 (cont'd.)
On October 9, Roadrunner bought a used truck on
account from North Shore Auto for $12,000.
T ACCOUNTS
Delivery
Equipment
Accounts Payable—
North Shore Auto
Debit
Credit
+
+
12,000
12,000
Section 2 Applying the Rules of Debit and Credit
(cont'd.)
Check Your Understanding
In double-entry accounting, for
each transaction there must be at
least two entries. If you are
increasing the Cash in Bank
account, what other accounts
might be affected?
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